[ARFC] Merit - A New Aave-Alignment User Reward System

Governance
70

[ARFC-Addendum] Update Merit for Round 4

@ACI - Aave Chan Initiative

2024-05-09

Simple Summary

We propose updating Merit parameters and rewarded actions to increase program efficiency, as well as evolving the wETH part of the merit program with a new program called “Ahab”.

Motivation

Merit’s first quarter and three initial rounds have been a clear success. Morpho Optimizers are now a dead product with zombie remaining TVL, and GHO grew to $54M despite unfavorable market conditions. The Aave protocol maintained and developed its market share in DeFi in a highly competitive landscape thanks to the Merit program. While “Merit is Forever” has been approved by governance, we aim to maximize efficiency while being conscious of the budget weight of this program.

Specification

Boosters Update

  • Removal of “Second-degree user of aligned protocol”: due to lack of demand from second-degree protocols and investment in positioning Aave at the front row, this booster is no longer justified. We will reconsider reintroduction if some protocols show signs of Aave-alignment.
  • Introducing weETH in the “Diversity supporter” boost: weETH is the fastest-growing reserve in Aave V3 Ethereum, and this boost was designed to favor alternatives to main LST. It might be worth introducing a LRT to this boost.
  • Removal of OG DAO participant: this boost was designed to reward early participants in the Aave DAO, but it seems unfair for new users to keep having this boost after more than a quarter. We propose doubling the “Active in governance” boost to favor users supporting the DAO voting activity.

Diluters Update

  • StkGHO Cooldown users: we consider users declaring their intent to leave the safety module should not receive Merit rewards. A full dilution is seen as punitive and not in line with Aave’s ethos, so we propose stopping the points meter when these users call the cooldown method, allowing them to accumulate points until the cooldown activation.
  • Morpho Users: The Morpho protocol continues to show direct hostility towards the Aave ecosystem onchain & offchain. We propose including all present and future Morpho products.

Merit wETH Program

The merit wETH program has both been a total success and below expectations. This program has factually been the opportunity for >250k ETH to leave other protocols to join Aave, but these results are almost exclusively due to direct coordinated BD actions from Aave Finance & ACI with a small subset of “whale” users.

We consider it an inefficient allocation of resources to continue the program as it is. To upgrade this program, we propose focusing on the most efficient aspect and focusing on the BD “whale hunter” efforts. We propose rebranding this new part of the program as the “Ahab” program, which is expected to be significantly more budget-efficient than the current program.

Next Steps

  1. Gather community consensus on this proposed path.
  2. If there is agreement, escalate this ARFC-Addendum proposal to a snapshot vote for formal approval.

Disclamer

The Aave Chan Initiative independently proposes “Merit” without external compensation.

Copyright

Copyright and related rights waived under Creative Commons Zero (CC0).

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