[ARFC] Acquire CRV with treasury USDT

Given there are a number of other OTC deals happening within the ecosystem now, the supply of veCRV is set to increase substantially, diluting all existing participants in the Curve Wars.

What would be the impact of 5m veCRV on the liquidity of GHO?

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Could you expand more on why this is the max we could buy? Is it based on Aave’s preference or on Curve’s preference?

I’d argue allocating some of Aave’s aUSDC and aDAI also to pay down this debt as much as possible would be beneficial for the protocol.

Good point.

Personally, I care much less about the efficiency of veCRV going forward.

I’d say the main value this proposal provides is reducing the risk of the Aave protocol taking on a meaningful amount of bad debt, which would hurt Aave’s brand and treasury holdings much more than the cost of buying these tokens now.

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Came to learn about this proposal from this blog post - https://cryptobullsclub.com/aave-chan-proposes-acquisition-crv-michael-egorov/. I think we should do everything possible to prevent another 2022 like crash.

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Hey guys, Fernando from Balancer here.

Even though I’m biased towards Balancer I think the purpose of this proposal is great, we should all help each other in times of distress like these.

I’d like to point out is that Aave has historically been the #1 focus for Balancer yield bearing liquidity and I’d personally like this to continue.

For example Balancer has intentionally not launched a stablecoin (like crvUSD) as we intend to remain impartial and focus on our core competence: being a powerful, flexible and capital efficient AMM, while collaborating with lending protocols (mainly Aave) to offer yield bearing pools to LPs.

I’m curious to hear why you @fig and @ApuMallku think moving away from Balancer is a good thing, we are always open to feedback to improve wherever possible.

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Thanks for showing up, Fernando.
I am glad that we are expanding our liquidity venues if we can be part of the “Curve Wars” by having an allocation of CRV. I was not implying that we should encourage the removal of liquidity from Balancer towards Curve.

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Good point raised here, and I think there’s an ask from @TokenLogic to see the benefit.

I believe that either @MarcZeller or @TokenLogic provide what the potential impact of the veCRV could be for GHO before this proposal moving forward.

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Personally, I don’t believe Curve - or any protocol that relies purely on inflation for TVL - will be a major component of DeFi as it matures, as the incentive structure is not sustainable. In short Curve is mostly a Ponzi and all Ponzis tend to collapse sooner or later. I’d rather not see AAVE lose out in the eventual collapse of Curve.
In my view it should be a priority of the AAVE DAO to seek to make GHO a staple of DeFI long after Curve is gone. So while there might be some short-term benefits of buying liquidity for GHO early on, a successfull GHO implementation will be able to attract liquidity and adoption on its own. I don’t believe the AAVE DAO is in a hurry to accelerate GHO adoption - it’s interest rate in itself is very attractive vs. other alternatives and what is already being worked on with Balancer was deemed enough to bootstrap early liquidity in previous proposals.
Also… @MarcZeller I’d like to point out there could be a slight conflict of interest in this proposal as we’re transfering risk from current stakers in the AAVE Safety Module (such as yourself) to the overall protocol. So it’s possible there might be a bias in the proposal to avoid being personally slashed, despite the event being net neutral to the AAVE protocol. I’d urge to assess the impact of bad debt not only from the perspective of stakers but also from overall health of the protocol - maybe it would be good for everyone to see that the AAVE protocol work as intended, even under great stress!

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I dont think this proposal signals anything, as a long term contributor i would say balancer has been a great partner on Aave and i would certainly hope to see this continue and grow.
Getting a partecipation in CRV helps expand the venues for GHO but balancer remains key for its growth imo

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I think we should shift all revenue from GHO minting to incentivise GHO liquidity across Defi
at the beginning we might need to also use most of the Aave protocol revenue to boast GHO liquidity
but I am not sure curve pools are the best choice here
I think that uniswap v3 are better
most of the trading are there
and we can build deep liquidity with most important pairs like ETH USDC and USDT

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Well, Curve it is known as the de facto DEX for stablecoins and a large number of trading volume it is done there. GHO needs to be on Balancer, Uniswap and Curve. The same way AAVE conducted a swap for veBAL, this time we should purchase CRV at a discount and derisk the protocol from having a bad debt. Its a win-win scenario.

Uniswap

Curve

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Many people talk about the danger of bad dept but guys Mich loan is at 1.7/1.8 health factor on all his positions, which is a very good factor so not big risk at the court term & he continue to refund he are on the good way,
Curve is sustained by almost all defi protocoles + big defi whales & you think curve who are one of the top defi protocole can be dead like that with “only” a loan of approximately 77millions atm
this is absolutely not like a Luna/ftx just a fud period.
The guys behind this loan is not anon but one of the best dev in the world too

Buy some crv at a very low coast price for aave is good for the gho at the long term & curve will generate a new revenu for the aave dao
this is a gain/gain game

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A third-party protocol (one of the most important, to be sure) has suffered an attack on its code, resulting in a drop in its governance token and jeopardizing the loans committed by its founder. The founder did everything in his power to avoid being liquidated, and exchanged his token for fresh liquidity by any means at his disposal.

On this scale, it’s a basic principle. CURVE, to quote it; is the foundation of our ecosystem and will remain so, as the danger seems to grow ever more remote with each repayment transaction by its founder. This crisis phenomenon seems to be an opportunity for Aave to position its pawns on this protocol, which can indeed influence the attractiveness of GHO in secondary markets, and therefore its ultimate usefulness. Curve being one of the most important, the battle must also be waged there, as the fight does not stop at the gates of these tense liquidities. From this point of view, it would appear that AAVE’s cash position, not to mention future income from GHO expansion, is capable of making this purchase without putting itself at maximum risk. In traditional finance, such a proposal could be likened to an unfriendly takeover bid. In this situation, and in the context of decentralized finance, it’s a question of cumulating the interests of reducing, on a small scale, the Curve founder’s exposure to his positions, and allowing the DAO to increase its power in the second stage of the game, with the GHO gauges. This seems to me to be relevant and to tick the boxes of multiple interests, as the game doesn’t seem to stop at these orange Health factors. And believe it or not, even without a crystal ball, the economic rules of the game haven’t changed.

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As a stkAAVE holder, I find this discussion as interesting as it is disturbing

I am aware that the situation seems to be calming down, however:

On one side, I’m extremely happy to see so many people active on the forum, looking for a solution to the $CRV crisis

On the other hand, AAVE is supposed to be a trustless protocol, and while I have a great deal of respect for Michael, hearing stuff about “off-chain discussions” or arguments like “he’s one of the best developers in the world so you can be sure he will repay his loan” is extremely worrying

I get the fact that DeFi is all about synergies and on top of that, the situation seems to be settling down, but next time something like this happens, let’s not forget to think critically

As for my opinion on the acquisition proposal, I’m like many other members: is this purchase really so “strategic” in view of the dilution of the supply due to the other OTC deals?

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Dear participants,

It seems obvious that major conflicts of interests are rising. Some people are trying to defend personal positions and expositions to a potential collapse of CURVE.

First, I would like to remind everyone here that the Aave “DAO” gouvernance is here for its community. This means protecting them in times of troubles.

This proposal is an economic non-sense. Our only mission is to mitigate AAVE risk and exposure to this situation. What Marc is proposing, is to increase our exposure.

We can not trust Michel Ergorov who has been playing a dangerous game. And as we speak he is still looking for “OTC deals”; let’s be honest here: he is dumping. Michel Ergorov is flooding the market with his CRV tokens, holding on to one statement “TOO BIG TOO FAIL”.

Aave has the opportunity to restore trust and positivty into the entire crpyto market by taking the right decisions, which is protecting our users and investors instead of “helping” a fraudulent “CEO” playing with funds.

We need to act now to protect our people and to protect Aave.

Best regards,
J.

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With all your respect, ser. I think the best way to protect AAVE is to acquire CRV at a discount and keep de-risking that market, the user will use 2M USDT to pay his debts. It’s too late to make substantial changes, that train left one year ago, and now it’s time to control the damage due to a bad risk management strategy. We need to accept that managing a lending protocol is extremely difficult vs. an AMM type of product. Let’s see the bright side of things, the user will start paying his debts; we will try to freeze the market, lower the LTV to zero, and gradually lower the LT while at the same time pushing the big migration from v2 to v3

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Hi,

This is called market manipulation. We don’t do fraud.

Honestly i don’t particularly care what he does with his tokens, as long as he repays the debt (which he is actually doing). Sure a long way to go, but all things considered, if this proposal moves forward, the 2M USDT will be used to repay the debt (which reduces exposure) and aave acquires CRV. If the position gets liquidated afterwards, the CRV will be worthless, but there will be two millions less to cover in bad debt. If the proposal doesnt go forward and the position gets liquidated anyway, those two millions will be needed to cover the bad debt, achieving the same net result minus the worthless CRV. So the difference is minimal, but if the proposal goes forward, the governance gets upside in case things go well (position doesnt get liquidated).

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Blockquote If Aave really wanted to protect the interest of its stakeholders and its lenders, the best strategy to use 2M USDT would be to place a limit order for CRV at $0.21 in order to buy it at a much lower price then what is currently proposed with this OTC trade. The possible outcomes would be:
If the price never drops to $0.21 then it is all good, the protocol doesn’t accrue any bad debt due to the liquidation!
If the price drops below $0.21 then the CRV position has been liquidated and Aave has occurred in bad debt, but at least we got CRV at a much lower price than $0.40…

This would be reasonable only if you managed to liquidate the position at 21cents per CRV, not to buy on the market. Buying on the market doesnt achieve the same effect because the 2M go to other counterparties, here they will be used to repay the loan. But i wouldnt bet on that game, getting into liquidating when there is a gov process in the middle is essentially impossible.

The structure of the CRV acquisition seems kind of disadvantageous to the DAO. It’s only a fair deal if both sides commit to the acquisition. Giving 0x7a simply the OPTION to swap at a predetermined price from a contract, from a purely economic point of view, is just nonsense.

I would suggest setting a predetermined price and having that address commit the funds beforehand. If they want the DAO to buy distressed assets, then the onus should be on them to put up their collateral first IMO.

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