[ARFC] $AAVE token alignment. Phase 1 - Ownership

[dennisonbertram]

Hello folks, Dennison from Tally.xyz here.

I wanted to share a little bit of a perspective as a service provider that has worked with many of the leading organizations in the crypto space and seen from a privileged point of view many of the struggles that decentralization has to deal with.

The challenges here are not unique, but despite the principle that may be argued upon and the idea of what might be right or just or correct, there is a lot of practical danger here that should be considered.

Without addressing the points that many people have brought up directly in this thread, many of which are very valid and have lots of pros and cons. I wanted to just talk high-level from a practical point of view. Most often DAOs are the worst at doing practical decisions; many things end up hinging on principle, or emotion, debate, or committee.

The worst thing to happen to Aave would be the perception by the integrators of the traditional financial system that they do not have a reliable counterparty with which to deal.

No financial system wants to have a DAO as a counterparty. We’ve seen it over and over. The traditional corporate world wants to know exactly who they are speaking with. They want to have relationships directly with decision makers, they want a face to the organization they are doing business with. The last thing they want is a nebulous political organization as a counterparty.

While many of the points here are valid and salient, the discussion and potential outcome could put Aave in great peril. Aave exists in a highly competitive ecosystem with a large number of well-funded, very competent competitors who would take such an opportunity here to undermine Aave’s success. The DAO will need to make a decision around what is the right thing to do vs. what is the most effective thing to do.

Put simply, do you want to be right or do you want to make money?

I know that there will be many people here that believe strongly in the principle of decentralization and take great umbrage to the actions by labs which seem to potentially not be fully aligned.

I would hope for the sake of all DeFi and the sake of Aave that the discussion can put in place formal relationships and formal procedures that will give clarity to the Aave DAO, the relationship with service providers, and its relationship to the wider ecosystem of consumers of Aave products.

Speaking just from personal experience, I would highly suggest that the community as part of this process focus on a path of somehow enshrining Stani and Avara Labs as a key contributor, and representative of the AAVE DAO. I know this will come off as extreme fanboying, but I think AAVE faces a greater existential danger of being delegitimized in the eyes of the financial systems AAVE is integrating. I’m sure there are many integrators of AAVE who didn’t even realize Stani is not “CEO” of AAVE. And while that’s not a good enough reason defacto to make him such- there is great value in the bridges already built.

History is rife with organizations on the cusp of success only to fall to internal infighting. I personally suggest the community think deeply: “Is this a debate that has to happen now? Can we postpone the outcome in some way?" AAVE is close to winning, but it has not yet won, and it’s competitors will be conspicuously silent lest they “interrupt their enemy while they are making a mistake”.

I know this opinion will not be popular, but I think it’s important to share. The Aave DAO is one of the most successful and we all want it to stay a guiding light for DeFi. There are great dangers here which are largely unseen.

If the DAO succeeds on principle, but it’s winnings are a wider market perception that it is a highly political and capricious counterparty, will that not be a pyrrhic victory?

Again, this is not to make this discussion irrelevant, it is important, critical, and indeed representative of the wider struggle that organizations in the space are navigating (See Uniswap with the Unification Proposal). So it is timely. What I caution deeply against though, is a circumstance that feels more like revolution than evolution.

Also, I strongly urge the Aave DAO to seek counsel outside it’s own organization. Speak to it’s competitors or peers, talk with service providers who have been through the process with others, talk to other foundations and leaders of Labs teams on how they handled it. The discussion should also include token holders, investors and other market participants, perhaps make it a formal process that extends beyond the forum, and make it a slow, considered processes to be sure that all the impact of the decisions made here can be fully known.

Update: I figure out some wording that I liked better:

The DAO should IMHO see Stani and Avara as one of it’s greatest assets. The discussion might be helpful to see it from that perspective: “How might we leverage one of the DAO’s greatest assets? What resources should we allocate to one of our greatest assets?”

Dennison

[sid_areta]

Hi all,

Having closely observed the recent discussions on the forum, X, and all across the space, we (Areta) wanted to step in and offer a potential path forward as a neutral, objective party that is not a service provider to the DAO. Before we do so, I’d like to re-introduce myself and Areta to the community to provide some context.

Background & Context

Areta is a leading investment banking and strategy firm focused on the digital assets space. We partner with teams on M&A/capital markets transactions and commercial strategy projects; for example, we recently sold a leading prop trading platform, Breakout, to Kraken, supported Bridgepoint Group on its majority acquisition of ht.digital (the first private equity buyout in crypto), and also worked with Uniswap Foundation to develop up and operate larger builder-focused projects. More relevant in this case might be the work we’ve been doing with Aztec Network over this year on entity restructuring and enabling operational excellence. We were able to get a birds-eye view into the roles of Labs and Foundation, how they could work together to ensure the success of the network, and at the same time, enable operational excellence, clear execution, and accountability to all stakeholders, be they investors, team members, or contributors.

We have a long history with Aave. I (Sid) first led the Aave delegation for LBS Blockchain Society from October 2022 to February 2024, having maintained >95% voting participation, establishing ourselves as the most viewed delegate platform on Aave, and being selected in the first cohort of the Orbit program itself. I then moved our delegation over to Areta in February 2024, and we’ve been delegates and have consistently participated in the DAO ever since. We’ve maintained very good relationships with all service providers and contributors on Aave, as I’m sure EzR3aL, Chainlink, LlamaRisk, Aave Labs, TokenLogic, and others can all attest to. We are a truly neutral party that is not a service provider, and have demonstrated this in our voting history.

Current Situation

Given our experience, the current situation to us stems primarily from a lack of organisational and role clarity across the DAO. To expand further:

• The DAO is not clear about the assets it owns or indeed, whether it is even able to own any assets without a legal wrapper or entity.

• The roles, responsibilities, and expectations of service providers to the DAO is not granularly defined today. There are a loose set of expectations; however, nothing formal has been defined and therefore can be enforced. The key drivers for good behaviour of service providers in a way that is “aligned” to the Aave DAO are reputational risk and affinity with the DAO, which, for an entity the size and paramount importance of Aave, are inadequate. There needs to be explicitly defined role clarity that is set in stone.

• There is a clear lack of definition in how revenue is distributed to the DAO and service providers, and even to tokenholders. While there are a set of expectations as to how revenue should be distributed, granular definition is absolutely necessary and would invariably make the community and token stronger.

• The method for counterparties to engage with Aave is not especially straightforward today. The options are to reach out to Aave Labs, ACI, or any other growth service provider, but the process for how decisions are made in regards to, for example, deploying Aave on another chain, is not well-defined. This is not fit for purpose in a world of increasing institutional engagement, where institutions require clear counterparties to engage with. This lack of definition also leads to bureaucracy, harming Aave’s competitiveness.

While these are the most glaring issues, there are several more operational and organisational challenges faced by Aave as a whole. All of these issues have led to tension between parties that are all, from the view of an impartial, involved observer, aiming to achieve the best for the Aave ecosystem. This tension has led to suboptimal outcomes in all manners - it has given competitors ammunition in BD discussions, brought uncertainty to long-term investors, and added a blocker in conversations with institutions who are invariably wary of engaging with a protocol “in strife”. Overall, this series of events is untenable and must be tackled professionally, bringing organisational and structural clarity befitting the scale, reputation, and primacy of the Aave ecosystem.

Path Forward

It’s admirable how the DAO and service providers have already started to formulate solutions to this issue. However, it is of utmost importance to take this process one step at a time, clearly define all of the issues, identify potential legal and operational routes forward (i.e., setting up an entity for the DAO, granularly setting out the roles of service providers and other contributors to the DAO, defining how revenue is distributed, etc.), reach consensus on each and every one of these aspects with key stakeholders in the DAO, and then execute.

It is critical to be deliberate and not act rashly at this point in time. This will only serve to expose the entire community to additional legal, operational, and even security risks, ensure even greater bureaucracy, and diminish Aave against its competitors. It is necessary to take time and not just move proposals to Snapshot immediately because this is not a simple issue and will take time to untangle and structure professionally.

In our view, these kinds of structured, stakeholder-heavy coordination efforts are best led by a neutral, independent party with no direct stake in the outcome.

Of course, this is what we at Areta do best and would be privileged to offer our support to the DAO. That said, the broader point is that an entity that can steer this process and key stakeholders in a professional manner while consistently reporting progress to the DAO is necessary to ensure that the outcome is one unified, operationally excellent Aave.

[Codeknight]

@dennisonbertram

The worst thing to happen to Aave would be the perception by the integrators of the traditional financial system that they do not have a reliable counterparty with which to deal.

This is why the DAO should own its IP. A tradfi integrator is going to want the branding, incentives and protocol integration approvals to all come from the same entity. From their perspective, its riskier if control of the protocol, social media and brand is split among different entities

[dennisonbertram]

I think thats a totally valid point. I would frame it more like, “How do we make sure Avara Labs has certainty in it’s ability to use the brand and license it”.

[myriad]

as long as stani has a lot of aave tokens that are not borrowed against, he’s going to keep paying the dao. This proposal is not necessary. We don’t need a legal fight over something that has in practice not been an issue.

[r0mul0]

I don’t see the point of this proposal. AAVE is growing and continues innovating, there is no clear reason why things should change.

This seems more like the coordinated action of a bunch of disgruntled former employees.

[Jordan]

I think there’s a lot of confusion right now, and some people are trying to reframe this debate into a simplistic “for Aave Labs vs against Aave Labs” dichotomy.

That’s silly and below the level of discussion we should be having.

The core topic here is the next step in the DAO’s path toward decentralization, specifically around ownership and stewardship of the brand/IP.

Importantly, once the IP/brand is transferred to the DAO:

It’s obvious that Aave Labs remains the best-positioned contributor to continue its lobbying work and to remain the major marketing force for our ecosystem.
It’s obvious that AaveChan should continue to be able to use the Aave name in its branding.
It’s obvious that multi-party contribution will continue, with Labs collaborating with BGD and other service providers on internal work and future versions of the protocol.
But we just need to formalize it.

And to be equally clear:

This is not an emotional debate driven by grievances or personal attacks.
This is not an attempt to sideline Aave Labs, to the contrary.
This is not about disrupting what already works today.
But we just need to have it.

This is about one thing: putting the DAO in the correct long-term structural position.

In a normal world, this would be a largely procedural change, a formality even. If it hadn’t been blown out of proportion, most people wouldn’t even have noticed the transfer.

Now that there’s noise around it, it can actually become a strong marketing moment: a visible signal that Aave is maturing as a decentralized system.

And as Stani has noted, Aave Labs is the largest token holder. That means Labs could, in theory, sway outcomes in governance (I’m not implying they will, just stating the reality). So even if these assets move under DAO ownership, Labs would still retain meaningful influence through token voting power for years.

Finally, I want to emphasize that this discussion is only the beginning. We’re not debating the exact legal or operational mechanism for DAO ownership in this thread.

Once there are clear positive signals and broad alignment on direction, the DAO can evaluate the best structure(s) to hold and manage these assets. There are multiple viable options, and the relevant contributors and experts can study them in detail at the appropriate stage.

Even though this discussion was initially triggered by adjacent issues, which should be resolved separately, we shouldn’t let that derail the main point: this is about strengthening decentralization and clarifying long-term alignment.

[roelio]

This proposal mixes up governance with ownership. The DAO governs the protocol, but brand ownership was never clearly established and, realistically, that ship has sailed.

Without a real legal mechanism, asking the DAO to “regain” ownership is wishful thinking and risks weakening our position. We should focus on securing enforceable rights that match what the DAO actually is, not pretend we can take ownership now.