RE: it is important to understand that we are in a situation that is too late to avoid the damage; now it’s time to control it, and by buying CRV at a discount and forcing the user to pay his debts is much more pleasant than having a huge bad debt on our shoulders
The pivotal question, as you’ve pointed out, is whether the investment of 2 M would bring about a significant difference. If there is a tangible positive impact, then this approach appears viable. However, if the potential gain does not justify the additional risk, it might not be a prudent decision. Leaving the market to decide the course of action could be a more reasonable approach. Over-managing risk in this manner might dissuade potential investors from engaging with AAVE as an additional downside.
RE: The question we should ask ourselves is how can we prevent another CRV scenario in the future. How did we allow to have soft parameters for v2 and not a proper risk management team behind it? Is it possible to automate some of these parameters by market conditions?
It seems that partial automation could be achieved through implementing a liquidity parameter. This would help in making dynamic adjustments based on the market’s liquidity conditions. Such an approach could enhance risk management and foster a more secure ecosystem for AAVE moving forward.
While CRV is a leading project, it’s important to not conflate the motivation:
This is not the reason – nor is it healthy to anchor this proposal on this position / person. The reason Aave can “support” (aka acquire at a lower price) is that CRV got hacked and is discounted.
While it’s important to maintain strong relationships and be good actors in this space, I’m not sure this is best to entirely guide our treasury strategy during times of volatility:
My personal opinion is to optimize for longevity and create treasury diversity beyond digital assets. RWA exposure, debt, etc – I’m excited for proposals and teams who are starting to think about this.
Stablecoins are a great opportunity to do that – and would rather see them used this way.
I’d be more supportive of swapping ARB (or a non-stable asset) for CRV in this instance.
two birds one stone. 2M USDT is not much on a 55M debt and definitely on itself doesn’t change much except sending a signal of support.
on the other side, I’m personally convinced that 6 months from now, the CRV value will be either 0/a few cents OR much higher than the price of the current proposal.
This strategic acquisition allows diversification from balancer and helps GHO that is the strategic focus for the Aave DAO now.
Every investment has a conviction part.
Sorry, I didn’t mean to say that as an offense, it’s just that this approach seems very anti-DeFi to me .
Let’s take a step back. Aave is supposed to be a decentralized and impartial lending protocol. What happened here is that a user took too much debt which he’s now unable to repay. If Aave was really impartial now what should happen is that the user should be liquidated as any other user. Instead this proposal is suggesting to use treasury USDT to partially bailout the user.
But let’s put ideal aside and think for a second if this can actually help improve the current situation from a risk-reward perspective. The real issue for Aave is that according to the current position, in case of a liquidation the protocol would incur in bad debt if CRV price dropped below $0.21. This is the critical price under which we don’t want CRV to drop. This proposal goes in the direction of repaying the user debt, but it does so by acquiring CRV at $0.40, a price which is almost 2x the critical price. This wouldn’t reduce risk for Aave, but instead it would increase risk by increasing exposure to Curve success.
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…
Buying CRV at $0.40 just makes no sense considering there would be other viable strategies.
I’m not saying we should follow this strategy, I’m just saying that if we really wanted to do an USDT->CRV trade, then this would be the better way to do it from a risk-reward perspective.
One thing can live with the other; using 2M USDT is not a big deal for the treasury and at the same time, you are free to propose using other funds to acquire RWA (like what Maker is doing with its treasury). I feel the same way as you, I’m glad that we are moving GHO away from Balancer and building liquidity on top of Curve is the best choice, imho. Having 2M USDT - CRV at our disposal to boost GHO is a great idea. I would like to add that we prefer to swap CRV for sdCRV, instead of locking CRV to get veCRV.
this is another topic that can be discussed outside of the current proposal as swapping to a liquid wrapper or locking will require an ad-hoc AIP anyway.
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?
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.
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.
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.
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!
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
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
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.
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
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.
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?
