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

This proposal marks a philosophical pivot in the purpose of the AaveDAO treasury. Previously, the “slow and steady” mentality of spending funds meant treasury funds were often used for known avenues like as buffers for risk-management, investment in ecosystem grants/projects/upgrades, and swaps to further capitalize the treasury. On the other hand, this proposal represents a shift into the realm of market intervention, where the purpose is to continuously redistribute treasury profits back to existing and new users of Aave.

The goal of growing the user base and transaction volume rather than further building the treasury chest may yet be achieved through market incentives. However, there are two main issues we have with the proposal:

One of Blockchain at Berkeley’s values as a student-run college organization is to inclusively grow the DeFi ecosystem. Creating “Dilutors” that discourage users to use other protocols goes against this value. This is not beneficial for the ecosystem as it creates silos and deters users from other protocols. As well, users can get around this by creating separate accounts to use Morpho. We also fear that depending on how the Migration bonus is structured, users may maliciously create multiple accounts to first use Morpho, then switch to Aave. This leads directly into our second issue, detail.

Financial incentives are tricky to implement because it may incentivise predatory activity. This is where we would love more clarity on the specifics, like why the price tag of $5M was chosen, how the proposal will deter against transfers to new accounts to dodge dilutors, how each rewarded action, booster, dilutor, and bonus is weighed, and timeline on the distribution of rewards. Without this information, it is difficult to determine the possible impact of such a large and expensive proposal and simulate/deter against predatory activity. We hope these concerns are addressed on the AIP.


The [ARFC-Addendum] Introduce “Hold StkGHO” Reward Action has finished reaching both Quorum and YAE as winning option with 539K votes. Governance approval on Merit scope will be updated accordingly.

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This proposal is the equivalent of creating a tax system.

You’re taking the revenue from the protocol and re-allocating it, in ways that a subset of people feel is beneficial for the protocol.

Tax systems have a tendency to grow complex and the taxpayers have a tendency not to like them.

This is only a few steps away from giving away my tax revenue to import illegal aliens.

It looks like a simple good short-term proposal to encourage usage, but it’s a quagmire in the long-term because you’ve just created a tax system that will grow more complex over time.

I’m not sure that Aave needs this, it’s especially dangerous when not sufficiently decentralized (a small minority hold more than 50% of stake).

This decision is really deeper and more complex than it seems here originally, this system will live and grow and re-distribute funds from some users to some other users for the rest of the protocols lifespan.

It’s the type of system that shouldn’t be proposed by the core group of contributors due to exactly it’s potential for political corruption.

Just not a fan of giving up all that to incentivize some short-term targetted usage.


As a long-time Aave user, I’m not a fan (and this isn’t particular to Aave) of web3 protocols tugging me by the neck to do certain things they want done on their time.

I feel there’s already too much of that, it tremendously increases the load on me as a user to be able to effectively use the protocol. I now have to either learn a new tax system, keep up with it weekly, ignore the tax system at my own peril, or leave.

It simply adds a lot of over head to being able to efficiently use the protocol.

I’ve studied the tax code in countries, but am I willing to study the tax code for 100 DeFi protocols and keep up with it as it changes week by week? Hoping I won’t need to do that, as there’s some simpler protocols to use without this.

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What kind of tax? You can do what you have done before the same way. No more fees being charged, no new approvals or anything else needed.

It’s pretty simple, you do extra tasks, you get extra rewards. You do the same stuff you did, you may get extra rewards otherwise just those rewards you would have gotten if there was no Merit.

I’m two roles: 1) AAVE User 2) AAVE Holder

I don’t like this system for either of my two roles, that I participate in.

As an AAVE holder, I hope to accumulate value from the protocol revenues, this doesn’t help me do that, it simply re-directs the value (and always has some percentage of corruption in doing so) to whatever protocol politicians decide.

As a user, I have to pay attention to weekly incentive changes to see if I can get more incentives somewhere. I don’t want to do this.

We’re taking protocol treasury assets and revenue (taxes collected from participating users) and re-allocating them (taxes re-distributed by protocol politicians).

Overall, I’m losing here both as an AAVE user and holder I feel. My user time is being wasted without adding value and my stkAAVE holder (EV) on assets collected has gone down to incentivize: in theory, we’re talking about the tax incentives part that incentivizes things that should benefit the protocol, but the more political delegates are disconnected and in the minority compared to the users, the more grift you will get due to a dis-alignment of interests.

In the current DeFi paradigm, very few people participate in governance and so giving such power to protocol politicians is just going to end in a lot of corruption, because they constitute like 1% of the user-base compared to non-voters and this creates a dis-alignment of interests. It’s exactly the same as you’re seeing right now in real-world politics.

I would trust these systems more where governance has an extremely high participation rate of like 30-60% of users and they’re well informed and capable of making good decisions. That’s simply not the current case in DeFi protocols.

So in conclusion, I don’t like it in either variant: neither as a long-time Aave user nor a long-time stkAAVE holder.

And I think it’s easy to think this is a good idea without realizing the long-term implications.

It’s a re-distribution mechanism that places power into a small amount of hands that wastes time for a lot of people and doesn’t add any fundamental non-zero sum value to the mechanics of the protocol.

Could this enhance the protocol? In theory? Yes. It’s a co-ordination mechanism. In practice? I think it’s far from the parameters that would help the protocol once you account for the added complexity, time overhead for everyone involved, and losses to corruption.

And it’s like the tax system, once you get in to using one…it grows more complex (costing everyone more time)… and it’s very hard to get out.


Merit is now live and already has been a huge success with >500M$ leaving non-aligned protocols back into Aave

Claiming can be done with aavechan.com/claim

GHO part of merit will be activated next week.


How does claiming work? Can we claim at a later date once rewards have been accrued to save gas?

Claiming can be done through aavechan.com/claim, as shared in the previous message. You can either claim, if applicable, both GHO and WETH Merit rewards at the same time.

Hello, the ACI is working on a dedicated frontend for it

There’s no expiry for the claim. and you can claim multiple rounds at once.

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How long does the incentive program last for? I thought it was 3 months?

On the merkl.xyz page, it shows it has already ended.


that’s the distribution period, as we do it as an “Airdrop” campaign is very short.

There are two more airdrops that have been funded by the Aave DAO to expect, more if governance supports them.

I’m not seeing any rewards despite having:

  • Supplies: ETH
  • Borrows: GHO
  • Stakes: stkGHO + stkAAVE
  • :white_check_mark: Participating in votes
  • :white_check_mark: Not participating in unaligned protocols

When I open the Merkl link, I see nothing to claim against my address. How can I check this or claim the reward?

The Merkl link didn’t work for me (probably due to my not-so-good Ledger Live mobile wallet). But it worked with https://app.defisaver.com/

hello, @banana_fun feel free to share your address in dm for a manual check, there’s no reason you’re not eligible.

we also made a ACI frontend for Merit, maybe this will help: ACI Dashboard


Thanks @MarcZeller - not sure how to DM on here, so trying you on Discord.

The ACI link doesn’t work for me either (and not game to just click and connect random links unfortunately)

EDIT: Turns out I joined too late for the first round and wasn’t eligible.

Same here. I joined on March 28th on the day the $GHO borrowing was opened to retail. I can’t find any code or clear description of how the rewards are broken down.

Merkl, Aavechan and DeFiSaver all seem to indicate that I am eligible for nothing.

Hey, where can we find details about the airdrop ? I have been borrowing with on have ethereum mainnet for a while now and I was eligible for 40 tho in epoch 1 and nothing for epoch two. I didn’t use morpho or anything that would dilute me.


Hello @Fcryteks, Merit round 2 is later today, claim page will be updated in a few hours and you’ll be able to see your rewards.

Basically, @banana_fun & @neozaru are in the same situation as you. Just a few more hours of patience, friends!


Thanks, I thought it was already dropped.

The following screenshot is misleading then ahah.
Have a good day
Screenshot 2024-04-10 at 09.41.52