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

that’s good feedback we’ll work on ACI claim page to be more clear and also give an estimation of future rewards for next rounds.

we should be ready for round 3!

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As we’re closing round 2 the community might be interested in some stats and conclusions on Merit so far:

Merit was designed for two things:

  1. stop the negative influence of the Morpho optimizer product hurting the Aave DAO Revenue:
    Merit round 1 has seen ~165k ETH leave Morpho optimizer to return to Aave, their product is now permanently imbalanced (52k ETH capacity before matching) and will never be able to provide additional yield on top of Aave, mission accomplished.

In general, Aave attracted >200k ETH and grew its market share during Merit round 1.

  1. Support the GHO stablecoin peg, allowing supply & revenue to grow & create a stablecoin-base part of the safety module:

As a result:

StkGho supply grew by 45%
GHO supply grew by 40%
GHO Borrow rate was increased to 13.8%
GHO peg remained in target rate 97% of the time
GHO protocol revenue grew by ~125% to 6.5m$/year currently

For more GHO-related data, feel free to check https://aave.tokenlogic.com.au by @TokenLogic.

Merit round 2 has seen 1367 eligible users,

Staker & Strakoor is the largest booster in terms of users (>100), indicating that Aave users trust the protocol & are happy to participate in the Safety module for yield & discount on their GHO borrowings.

The ACI is keeping a record of all data and will open-source merit scripts & data when the merit program ends as announced.


I am glad Aave took the time to develop GHO at a sustainable pace. The merit program supporting GHO use and staking seems to be the priority.

Has there been thoughts/discussion to allow for boosters/rewards for Aave holders/stakers in safety module?

All in all good direction with merit program.

@MarcZeller Can you clarify where the funds for Merit are coming from? Sounds like from the protocol treasury and/or funds that would otherwise accrue there via reservefactor?

It’s basically written in the thread. It’s from the profit the protocol is making after the DAO has paid every service provider, security and so on. So net profitable protocol that is able to start campaigns like Merit to generate even more revenue.


Define “Non-Aligned Protocol”

That seemingly could mean anything a priori, Dogecoin is a “non aligned protocol”? Is comp a “non aligned protocol”? Is uniswap? etc

Then penalty is severe, for something that seems undefined
“Severe dilution (up to -100%)”

Could you share the link to the page where you took the screenshot? I can no longer find it on the forum.

Actually, found it, please ignore.

Everything is actually crystal clear
Capture d'écran 2024-05-09 101700

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[ARFC-Addendum] Update Merit for Round 4

@ACI - Aave Chan Initiative


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”.


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.


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.


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


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


Hi Marc,
I understand this proposal and I support it. It would be great to be able to choose the % of stkGHO we want to cooldown when we reactivate cooldown period.

For instance :
Before reactivation, 10,000 stkGHO with 1,000 cooling down => MERIT REWARD FOR 9,000 stkGHO
After reactivation, 10,000 stkGHO with 10,000 cooling down (no possibility to choose the amount to cooldown) => NO MERIT REWARD
After reactivation, 10,000 stkGHO with 2,000 cooling down (IF possibility to choose the amount to cooldown) => MERIT REWARD FOR 8,000 stkGHO


So I have asked for clarification on this matter before ([ARFC] Onboard New Risk Service Provider - #11 by midapple) and will ask again: Can someone explicitly codify what is and is not not allowed for service providers to do. LlamaRisk is actively curating a Morpho Vault but it also seems like they have won the role of being the 2nd risk provider for Aave. In the past multiple service providers and prominent DAO voices (@ACI, @TokenLogic) have expressed their outright objections to any service provider working with/for Morpho. Interestingly enough, none of these members have since taken a public stance on LlamaRisk’s activities. What is going on here?

It would also help if @LlamaRisk explicitly lays out their conflicts of interest.

I take no issue with LlamaRisk earning their keep. People and companies need to be financially sustainable The Aave DAO however should hold itself and its members to a higher standard with respect to processes and rules.

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The ARFC-Addendum to Update Merit for Round 4 has been escalated to ARFC Addendum Snapshot.
Vote will start tomorrow.

Following the ARFC Snapshot vote, the current ARFC Addendum to update Merit Round 4 has recently ended, reaching both Quorum and YAE as winning option with 679K votes.

Therefore, the ARFC Addendum has passed and Merit Round 4 will be updated accordingly.

I think the Merit rewards are great! have a quick question though. I was able to successfully claim all 3 rounds of the GHO merit rewards at once. Then I tried to repay part of my GHO loan with the merit rewards. The transaction was approved and shows successfully on Etherscan as repayment but the principal value of my GHO loan on AAVE didn’t change after the transaction.
Is there a delay or did something go wrong?


The discord is a more suitable venue for support questions; it’s very likely you approved the smart contract with your first transaction and need a second traction to call repay() on the contracts. Check your wallet if your GHO still sits there.

Without futher information hard to be more helpful. Please check with Discord for support.

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