I checked the StakeDAO offering and that option might make sense as well.
Will present this weekend a third path with figures for governance consideration.
I checked the StakeDAO offering and that option might make sense as well.
Will present this weekend a third path with figures for governance consideration.
The boost only applies to Aave’s PoL of LPs. Not sure how sizable it will be, but there are alternative options that would probably enable achieving an even better yield : staking on Convex, Yearn or Stake DAO would allow having the boost + some incentives.
So not sure that from a pure yield perspective, it would be better to stake directly on Curve. You can see the example of Abracadabra which has a Curve whitelist but still chose to go through aggregators to get their boost + incentives (if I am correct).
Furthermore, with Stake DAO, Aave could achieve a 1.58x boost on the voting power, which would translate into bigger emissions for pools where Aave has PoL, so you would still have boost coming from there.
To put it in a nutshell, I believe that even from a pure yield perspective on future LP, it would be more profitable to Aave to use sdCRV.
Would just like to throw my 2 cents in here.
I agree with Hubert that there are better options if deciding to use derivatives.
The merits of veCrv are that on top of direct governance votes and gauge weighting, there are no other contract risks or trust involved. As a large protocol this point should definitely be highly viewed. But the idea of boosting LPs is a bit moot. There’s really no way this much CRV would give enough boost power in the long run. All in all I think vecrv is still a good choice as I can see reduction of risks as very valuable.
This token works fine I think for individual users or smaller positions. However for large protocols like Aave I dont see it having the utility that you really want as well as puts all revenue at the risk of token price. If Aave wants to put some weight on a specific gauge, they can sell a bit each time and pay for incentives but price changes in the token determine if any profit was even made at a given timespan.
Aave would be much better off with a price agnostic token.
The real derivative choices: Price agnostic tokens
cvxCrv: cvxCrv allows indivudal reward weighting between gov tokens and stables. This means its the higher stable option of any crv derivatives. While it has no voting mechanics, rewards can be used as incentives. Choosing stables is always a high demand reward and gives lots of leeway in how reward can be used, choosing CRV+CVX gives more crv compounding plus exposure to CVX. CVX will in turn give back more cvxCrv as well as gain access to Curve governance and gauge weightings (which will also add a bit more cvx to pools that CVX vote with in the future).
And another big point is that CVX will also give Aave governance voting for Frax(veFXS). With the release of GHO, a partnership with FRAX would go a long way in creating liquidity for GHO by using veFXS to vote on FXS gauges for GHO on the Frax platform. Holding CVX would put Aave in a good position there as well as Convex holds a very sizeable position there as well.
sdCrv is also, as pointed out above, another good choice for Aave. Aave will have a choice between claiming vote incentives or even voting for their own pools. It also is the only crv derivative currently with core Curve governance exposure (and all in all would be better than the ycrv flavor of governance rights). sdCRV also gives exposure to SDT tokens, which can be used as a means of revenue OR use it to boost the sdCRV.
There’s a lot more options on sdCRV via gauge voting.
SDT also has some mechanics ties in with FXS as well! Any boosting done to sdCRV also boosts their sdFXS token. 3 tokens have to be held in that case but it does give options.
1) The price agnostic properties of cvxCRV and sdCRV should be highly valued for a protocol’s holdings. There is no loss of rewards when token discounts expand or shrink and each token’s utility mechanics perform each week as it did the pervious.
2) Both cvxCRV and sdCrv give more options in general and also exposure to things like veFXS which should also be highly valued. (CVX is direct, SDT via boosting)
3) vanilla veCrv is still a very viable option as reduction of risks and simplicity should be highly valued over APR.
After running some simulations, and taking the very good points made by @C2tP , I did a quick sumary of analytics to compare all those different options from a numerical and practical point of view (in the table below).
Back up of this image can be find here.
Putting aside risk considerations, it appears that if ACI and Emilio were to delegate their veSDT boost to Aave, the most attractive option to maximise Aave’s impact on Curve’s governance and emissions would be to use sdCRV. The 633k CRV owned by Aave would translate into 837k veCRV votes.
Moreover, if other veSDT holders were to delegate their boosting power, Aave could reach more than 1m veCRV votes, thus increasing by 60% its ability to direct emissions and incentivise liquidity compared to doing it by simply locking CRV.
Finally, I think it’s important to point out that the use of sdCRV doesn’t require to regularly increase the lock duration, an onchain transaction that would be needed every other week or so in order to maintain Aave’s voting power to the maximum if the veCRV road was chosen.
Looking forward to hear feedback on this, I really think a smart approach such as the one mentioned above could be a great opportunity for Aave ahead of the GHO launch.
If the StakeDAO option is chosen by governance, the ACI commits to delegating all our boost to Aave DAO for a period of 1 year.
Thank you for the feedback on the above proposal. It is great to see a number of stakeholders investing time and effort participating in the discussion.
We opted to share two preferred strategies depending upon if there is a preference for governance influence or yield. Llama’s preference is for Aave to have exposure in governance influence via the base layer protocol as a core strategic holding. A relatively smaller, liquid and higher risk allocation to protocols built on top / around base layer protocols is possible as it compliments the primary core holding.
Earning a holding in another protocol requires a lot of time and capital whereas the core holding in the base protocol offers immediate benefits. This is why our preference is for Aave to initially acquire veBAL over auraBAL and veCRV over st-yCRV / cvxCRV and sdCRV.
When comparing the yield strategies offered by Convex Finance’s cvxCRV to Yearn Finance’s st-yCRV product, we preferred the st-yCRV product for the below reasons:
As for the governance influence strategies, the sdCRV option was omitted from the original proposal for the below reasoning:
Whilst sdCRV is tradable, there are liquidity concerns for entering and unwinding the position:
Upon entering CRV to sdCRV, Aave would gain 10k more units of sdCRV (0.983:1 at the moment)
Unwinding sdCRV to CRV, Aave would receive 41k less unit of CRV
(0.936:1 at the moment)
Aave would need to acquire 170,000 veSDT to realize the same voting power as holding veCRV.
With the same $151,840 amount, Aave could directly boost its veCRV voting power of 23% by acquiring ~ 150,000 more CRV. This also avoids Aave having any exposure to SDT.
Aave naturally earns CRV which can be converted to veCRV periodically to increase its voting power, veCRV boost and its yield over time.
As this system can be complex, it’s very possible to see the voting power boost proposed by Stake DAO decrease if all sdCRV holders decide to stake & vote.
Also, less depositors in the sdCRV liquid locker means less voting power boost from the TWAVP period.
At this point in time, we do not believe acquiring SDT or sdCRV holding is an optimal path forward for Aave. There are more compelling alternative options which are veCRV for governance influence and st-YCRV if Aave seeks a high yield option.
We have been discussing with Ernesto regarding how to implement this on the Collector Contract. There are a number of considerations with varying degrees of complexity that need to be considered. Governance votes and gauge votes are different when comparing Balancer and Curve. As a result, we intend to address both veBAL and veCRV within a single forum post. This forum post is being developed and will be shared in the coming weeks.
Ideally we would like Aave to prefer holding veCRV before going to deeply into how to manage veCRV on the forum. We are confident we have several paths forward and look forward to discussing the various options in the future.
As mentioned several times above, our recommendation is to utilize the veCRV voting power for Aave pools. Since the DAO didn’t voted any bribe budget, we don’t expect to generate any bribes revenue from the veCRV holdings.
When the yield from bribes is removed from the table above, the sdCRV interest is significantly reduced.
Otherwise if you count the bribes yield, you should also count it on veCRV. This way we are comparing similar data with the same underlying assumptions. It’s easy to inflate the numbers with selective data.
Also, while the yield is not the priority for this strategy, it’s worth mentioning that even with the unknown max veSDT amount that could be delegated from ACI and Emilio, the yield from st-yCRV remains better than sdCRV based on your calculations.
There is the exact same issue with veSDT lock, but with more management as sdCRV also requires to re vote each week to not lose the voting power.
It’s kind to delegate your veBoost for free, especially since you could earn 21% APR by selling it on Warden.
Would it be possible to know the total size of the veSDT holding that could be delegated to the DAO, and if the intention is to periodically re lock the position during the full year to avoid decreasing voting power ?
Hey All, Corn from Yearn here. I want to point out another aspect of utility and strategy the yCRV wrapper satisfies that hasn’t been mentioned: the ability to move between st-yCRV and vl-yCRV depending on if Aave wants really high yield or just control over gauge voting.
vl-yCRV is about to go live and Aave will get 100% of the gauge voting power they’d get with veCRV. Aave would give up the curve admin fees (these go to st-yCRV), but they get the ability to exit back to CRV (there’s still a peg) whenever they’d like. Moving between st-yCRV and vl-yCRV is easy too.
sdCRV is a great product if you are bullish on SDT and we agree with the math posted by @Llamaxyz above.
You can read more about vl-yCRV here: Overview | Yearn.finance
Thank you again for considering the yCRV wrapper. If there are any other questions please ask. I’ll make sure to keep an eye on this thread.
This is a bit of a moot point as Aave won’t have have enough veCrv to boost themselves properly anyway.
This seems minor as it should be automatable. Also take note that vanilla veCrv also needs to revote as more veCrv is locked and/or voting power decays.
I do agree that veCrv is a good choice all around though.
As of now 270k veSDT on my side & 40k veSDT on Emilio side. As shown in the table of @Hubert post
I’m not particularly interested in doing that for now, I’m more interested in Aave success as part of the ACI.
Based on @Hubert 's quantitative analysis, amazing @C2tP 's points, feedback from @MarcZeller and community,
sdCRV is the best solution to max out value for Aave on Curve Ecosystems (bribes, boost, gauge voting etc). That’s why Stake DAO Admirers Crew will delegate >500k veSDT voting power to support sdCRV.
I’ll also personally support this path from Curve’s angle by engaging
Curve Llama Gangsta Club to continue voting for Aave pools since it will bring even more rewards down the road.
That’s quite the support to Aave DAO, thx ser.
With that commitment the “maxBoost” scenario is achieved
The ACI is in favor of supporting StakeDAO.
That’s a great approach which can leave the door open for locking the actual CRV for veCRV if there is an appetite for that in future, without actually changing the asset to a completely different one!
But of course, applying for whitelist is welcomed as well, or why not both!
Aave risks incurring significant slippage upon unwinding the sdCRV position in current conditions and there is no peg which means the spot price could deteriorate further. If Aave earns yield over a given time period, there is the potential for a significant portion of that yield to be lost to slippage when swapping back to CRV. It is important to note there is a minimum hold period for Aave to offset the slippage costs when unwinding the strategy. This acts to introduce a minimum holding duration just to break even without considering the administrative overhead in facilitating any AIPs.
Given the effort of @AaveCompanies investment in staked aToken and Aave already incurring auditing expenses, it makes sense to have the ability to hold veCRV and use it to boost Curve Finance Liquidity Positions on a Aave v3 AMM deployment. We may not need veCRV now for this purpose, but it certainly makes sense to have this flexibility in the near future given staked aToken is in line behind the stkAAVE upgrade audit. If we are optimistic about when stake aTokens can be implemented, reverting back to CRV at a later date may be hindered by the breakeven payback period of holding sdCRV when considering the price impact when unwinding the strategy.
There are also considerations for GHO, launching soon, whereby Aave could create a new Aave v3 aToken pool on Curve Finance. No doubt, there are Aave investors who will support this pool, as there are users voting for the exisiting Aave v2 pool. Perhaps aUSDC, aDAI and GHO.
It would be good to discuss these potential use cases in the context of sdCRV (or st-yCRV) and if Aave wants to revert to CRV then veCRV to support GHO or staked aToken options at a later date. Given the time to progress through governance, the current status of GHO and staked aTokens, we might find ourselves only holding st-yCRV or sdCRV for a short period of time. This would be a sub optimal outcome for Aave given the slippage upon exiting the strategy.
In my honest opinion, it is not wise for Aave to rely on third parties support for boost or optimising the CRV holding when there is no enforceable manner (legal or smart) that creates accountability. Circumstances can change, outside of anyone’s control, which means any third party support comes with risk that despite best intentions, future events can change from what we intend now. This is my main concern when relying on third party support.
It is natural for investors in Stake DAO and Aave to try align the two communities, there are mutual benefits here. I am not sure about how ACI or Emilio intends to approach the Snapshot vote, I’ll let you both decide and trust your judgement.
It should be reminded that the alternative is to lock the CRV for 4 year and periodically relock with no opportunity of “exiting” the position.
The Aave DAO is not here to “trade”, And to my understanding, the aim is to maximize the benefit of current & future CRV holdings.
In terms of benefits, with StakeDAO Boosted votes the DAO ends up with 1.01M VeCRV votes instead of maximum 630k Votes of current holdings.
With current commitments from the community of veSDT delegated boost, if the CRV holdings of the DAO would be higher, there’s a significant buffer offering the DAO max boost.
in terms of Yield the “max boost” of StakeDAO is significantly higher than any other options.
The ACI support benefits both Aave DAO & StakeDAO ecosystems, as an example of our ecosystem synergies, incentives are aligned at the benefit of both parties.
the ACI will obviously vote accordingly and will respect the governance if veCRV option is chosen, if that’s the case, we’ll just make some decent yield with our veSDT on warden as @Dydymoon suggested .
Thanks for your answer, I will try to go through all points as precisely as possible.
When comparing the yield strategies, you might have overlooked Concentrator: from a pure yield perspective, it is currently undefeatable, standing at 75% APR rn.
This point is not valid imho. If you enter and then exit, you end up with the same amount (minus trading fees of 0.04% in and out). You cannot sell sdCRV if you don’t have any, so this 41k is very theoretical. Besides that, sdCRV has the best historic of peg maintenance, and you can check it on defiwars. This is due to its design, where every single action is turned towards peg maintenance.
sdCRV has the best liquidity as a proportion of its total supply : CRV in the liquidity pool represent 5.9%, similar to yCRV which you are considering (5.9% as well). Its liquidity was rather around 9-11% historically, and is currently slightly lower than usual due to take profits on CRV’s strong performance recently.
Finally, as Aave is aiming to get a long term position on Curve, and is willing to potentially lock for 4 years, not sure this immediate liquidity question is the most important with regards to what you are trying to achieve. Again, since you are considering yCRV, I don’t anticipate sdCRV liquidity to be an issue.
As explained very well by C2tp, with 630k veCRV Aave won’t be able to significantly boost their PoL, and certainly not boost it more than the boost they would have staking their LP through Convex (289m veCRV), Yearn (47m veCRV) or Stake DAO (25m veCRV) and certainly not exceed their CVX or SDT incentives. However, with the 1.57x voting power boost that Aave would get with boosted sdCRV, and staking their LP through aggregators, Aave could get double boost: 1.57x boost on total incentives sent to Aave’s pool + up to 2.5x boost on LP. There is no way this can be less interesting from a pure economic perspective. Happy to run further maths to have a more precise comparison, would just need the expected PoL for that.
sdCRV indeed requires voting for gauge votes every other week. This vote can be delegated to an EoA which can do it in a very easy gasless fashion. It will allow Aave to adjust their votes frequently which is generally needed when you have several pool to incentivise, without passing several transactions. However, sdCRV does not require increasing the lock duration every week to maintain full voting power (which needs an onchain transaction, and btw delays the perspective of an exit, which seems to be an important consideration).
Aave wouldn’t hold any veSDT, so this would not be a problem. However, good to see that you agree with me on the value of liquid wrappers!
This is true for governance votes, but not for gauge votes. Besides, Aave is here for the long term
As mentioned, several veSDT & Aave holders would be happy to delegate their veSDT boost so that Aave can benefit from a 1.57x boost instead of having a discount on their voting power. Therefore Aave could get max boost without buying any SDT. It could just farm them to be in position to boost its position without community support after one year.
Thanks for making those very interesting points, happy to answer any further questions!
btw, on this, please note that the veSDT boost Aave will receive will also be able to boost Aave’s BAL holdings. Two birds with one stone
Thanks for this very valuable comment Dydy. It’s precisely because I know that Aave would probably prefer to vote rather than benefit from bribes that I singled out the bribe APR from sdCRV yield. If Aave chooses to go the “governance way”, the good APR to look at is indeed the one without bribes. If Aave prefers the yield way though, the bribe APR becomes relevant. And as you said, it could also be added to veCRV, it’s a good point.
If really what you look for is the yield, I advise looking into concentrator which has crazy good yields for CRV.
Not an issue since Aave wouldn’t have a veSDT lock.
It’s not for free since it benefits Aave. Any Aave holders could actually delegate their veSDT boost to Aave since it will benefit Aave massively to be able to support its liquidity for GHO in the most efficient way possible.
Marc and Julien answered better, but yes, the objective is to maintain max boost for 1 year.
Really glad to see Aave finally diving into Curve. It’s especially timey as GHO’s release approaches. There’s a lot of choice on what could Aave do with its CRV and we are not here to promote any of them, we (Paladin) have also played a lot with most lockers, and like them all. Just want to point out that this is inaccurate to our knowledge, there is indeed a TWAP on gauge votes: