[ARFC-Addendum] AaveDAO policy regarding Spark fork

[MarcZeller]

---

Title: [ARFC-Addendum] AaveDAO Policy Regarding Spark Fork

Author: @ACI

Date: 2024-07-04

---

Simple Summary

The Aave DAO Governance is invited to provide a statement regarding the Maker(Spark)/Aave DAO agreement.

Motivation

In Feb 2023 an ARC (ARFC governance ancestor), allowed Spark to be a friendly fork of the Aave V3 codebase in exchange of 10% profit share.

Due to some creative accounting on MakerDAO, the actual revenue share is much closer to 1% of profit by MakerDAO, which was justified by the Spark/MakerDAO entity segregation and the 10% RF on the Spark market.

On the Maker side, it was decided to remove any RF collection on Spark side, allowing MakerDAO to earn more on the interest paid by the Spark users. As Maker is minting DAI into Spark and represents 97.8% of the DAI liquidity in Spark, Maker is the main recipient of interest paid by Spark users.

This situation, also considering the fact that PheonixLabs (devs of Spark) is an entity on MakerDAO payroll, makes it clear that Spark and Maker are the same entity. This is enforced by Spark becoming an official Maker Subdao as part of their “endgame”.

We then have reasons to consider the Spark & Aave DAO agreement to be a Maker & Aave DAO agreement as Spark is a transparent proxy of Maker entity.

As a result, we consider the creative accounting done by Maker leading to a ~1m$/year profit share to Aave to be a reason for a breach of our agreement and justification to declare Spark as a non-approved fork of the Aave Codebase by the Aave Governance.

To de-escalate conflict and improve the Maker/Aave relationship, the ACI made several synergies proposals in the MakerDAO forum to change the paradigm in the Aave & Maker relation and create mutually beneficial markets, allowing both DAOs to increase their profits compared to the status quo and benefiting the DAI & Maker ecosystems.

This proposal allows the Aave governance to provide feedback on the future of the Aave/Maker diplomacy and get out of the current status quo that is optimal for none of the parties involved.

Specification

The Aave governance is invited to express their opinion on this proposal with the following options:

• Option A: Declare Spark in breach of agreement
  This option will declare Spark a non-approved Fork of the Aave codebase

• Option B: Approve new dynamics in Aave & Maker protocol relationship

  This will give greenlight signal to develop and deploy new synergistic markets to make the DAI shine and allow Maker to re-activate a D3M policy on markets tailored for them and the Main mainnet market.

This option will be followed by specific TEMP CHECK & ARFCs to query governance approval on the implementation of these new synergies.

• Option C: Keep the Status Quo
• Abstain

Useful links

• Original Spark ARC in Aave
• Spark Aave revenue MakerDAO proposal

Next Steps

1. Escalate this proposal to Snapshot stage
2. The snapshot vote result will be considered canon and define the Aave Governance Stance on MakerDAO & Aave DAO agreements

Disclaimer

The ACI was not compensated by Maker or any third party for the creation of this proposal.

Copyright

Copyright and related rights waived under CC0

[MarcZeller]

With the ACI, we’re naturally trending towards synergies with the Maker ecosystem.

This is why we’re inclined to cast an Option B vote.

However, all acts from MakerDAO for nearly two years have favored less cooperation from their side with Aave. We also do not consider the status quo satisfactory.

This is why we will cast an Option A vote unless there’s clear and quantifiable signaling from the major MakerDAO delegates towards a synergistic approach.

Maker payments account for less than 1% of the current Aave revenue, and maintaining the status quo will be interpreted as a greenlight to pursue new strategies that will outperform current Maker payments.

We, therefore, consider every choice but the status quo a net positive, and this will guide our vote.

[Codeknight]

@MarcZeller

Option A: Declare Spark in breach of agreement

Was there an actual agreement?

I seem to recall Spark offering the money unilaterally, while you were quite hostile to the fork…

[MarcZeller]

hello @Codeknight

1. yes, the agreement was voted by a snapshot vote on Mar 3rd 2023 here’s the link:

https://snapshot.org/#/aave.eth/proposal/0x15a031fa5f848aac269214a7cda2fed314590ab0c935b6879e4bf7fb9d87cc2c

2. that is incorrect, My personal vote accounted for nearly half of the total YAE votes:

[EzR3aL]

Hi,

i just finished reading that post here and the one on the Maker Forum.
It seems like that Spark/Maker are open for business, but still there has not been any real commitment.
It is also unfortunate that no one, not even Rune, have addressed the topic, that Spark (Maker) is basically obliged to pay 10% as promised in the ARFC. At least thats what one would expect.

From the current standpoint I would love to see Option B being chosen, but only if Maker Delegates agree that a mistake was made and Maker has to pay Aave the outstanding amount.
Or as also discussed, active the D3M and have both protocols profiting from it.

If no agreement can be found I will vote Option A, as Option C would be a bad signal and the DAO can easily make 1m somewhere else without the need to have Spark (Maker) share any profit with us.

Its now up to Spark/Maker to decide on how to move on. I think @MarcZeller did propose some great suggestions on how to move on.
Best case imho would be to have a dedicated market as Marc proposed where risk parameter could be defined together which would be highly secure but also allow revenue to grow immense.

Also I would like to have the DAO think about creating an ARFC about the consequences of what a friendly fork is and what the Aave DAO service towards such a fork will be & will not be.

[stani]

While I agree that Spark should compensate Aave DAO fair price or at least the proposed 10% profit share, I would say that the existing accounting methods indeed are resultiong to fee avoidance, which is a hostile approach towards the relationship between Aave DAO and Maker/Spark and the whole fee sharing agreement.

However, I do believe that more can be achieved for Aave DAO and for Maker by establishing great DAO relations between the two. This would be beneficial also for the whole DeFi space, seeing both of these DAOs collaborating for greater benefit.

I would signal positive support for Option B, if there is a commitment from MakerDAO’s side on improving the relationship and fostering synergies. It’s the right way to move forward, only if there is mutual commitments.