[ARFC] TokenLogic + karpatkey Financial Service Providers - Phase II

[ARFC] TokenLogic + karpatkey Financial Service Providers - Phase II


Title: [ARFC] TokenLogic + karpatkey - Phase II
Author: TokenLogic karpatkey
Created: 2024-07-16


TL + kpk 2

Summary

This publication proposes the continuation of the collaboration with karpatkey and TokenLogic for an additional 6 months, with a proposed budget of 500k GHO. The proposed contributions extend over the three themes detailed below: Treasury Management, GHO adoption and the Aave Stack.

Motivation

The TokenLogic and karpatkey partnership has created significant value for the Aave DAO across all three focus areas detailed here. GHO’s peg, liquidity, and growth prospects have each improved dramatically over the last 6 months. The DAO’s finances are more transparent than ever before and the DAO is firmly positioned for growth.

Building on the success of Phase I, we seek to extend our collaboration with the Aave Community for another 6 months. Phase II of our engagement is to focus on enabling GHO and Aave to grow market share through prudent financial management and contributing to numerous growth initiatives. Our three primary focus areas are summarized below:

  • Treasury Management
  • GHO Adoption
  • Aave Stack

What to Expect

Treasury Management

Asset Management

The Aave DAO receives revenue in the form of revenue-generating aTokens for each deployed lending market. Whilst that reduces the need to deploy assets beyond the protocol itself, this creates a need for continual rebalancing of asset holdings.

To facilitate streamlining routine operational tasks, the Finance Steward role, which has been already introduced to the Aave community, will be developed. Given the ability to create allowances, streams, perform transfers, assets bridging, and swaps within pre-approved guidelines and without AIPs, we expect the governance overhead around treasury management to decrease significantly.

The GHO Finance Steward’s capacity to perform swaps will also be improved by the implementation of the Aave Swap contract. With this tool, the DAO will be able to acquire assets in a timely and targeted manner, and to support GHO’s peg during turbulent market conditions with the ability to create limit orders.

Financial Security

A key objective is to define the DAO’s annual budget and secure sufficient funds to ensure DAO operations under stressfull market conditions. As the DAO’s revenues have exceeded the burn-rate and currently holds more assets (about $145M at end of June) than planned expenses, this proposal will target to cover a six months’ runway matching holdings with expense tokens or token class as deemed appropriate for capital efficiency. This approach guarantees financial stability and operational continuity for Aave DAO.

Key components of this objective will include:

  • Deploying bridging contracts (as required);
  • Bridging Aave funds between networks;
  • Alocating assets for capital efficiency. In particular, migrating funds from Aave v2 to Aave v3; and
  • Swapping assets to align expenses and holdings.

Aave Analytics

Reporting and analytics functions will be expanded to provide the utmost transparency into the DAO’s financial status and overall performance of the protocol, and to support informed decision-making and analysis of the Aave ecosystem. This includes the Aave Portal and the Aave Treasury Report, which shows detailed information on DAO holdings and treasury performance.

The Aave Portal will continue to evolve to showcase the performance of the Aave Protocol and GHO’s adoption. Over the next 6 months, the portal will expand to include all revenue sources (incl. Accrued), assets holdings and expenses (incl. budgets) in granular detail, whilst also beginning to include high-level performance tracking across existing covered deployments.
Several legacy community Dune Dashboards will be integrated into the Aave Portal, where they will be maintained and expanded upon over time.

GHO Adoption

Oversight

During Phase II, GHO’s growth is expected to accelerate and expand to several networks. To nurture and maximize the growth potential of GHO, its success hinges on the ability to hold its peg and scale simultaneously.

As a GHO Steward, we will continue to manage key GHO and GSM configurations, including Borrow Rate, GSM Caps, and GSM fees. As the Treasury Managers, we will ensure the GSM is adequately funded, targetting a collateralization in the range of 5% to 10% of total supply, and that GHO swaps are performed in a manner supportive of retaining a tight peg.

Liquidity

We will continue to lead the operations of the Aave Liquidity Committee (ALC), overseeing the liquidity growth across different protocols. This includes

  • Adjusting liquidity incentives to maintain sufficient market depth;
  • Defining and executing direct liquidity incentives;
  • Leading initiatives that create utility for GHO;
  • Optimizing the utilization of the DAO’s strategic voting assets;
  • Supporting GSM Integrations with aggregators;
  • Ensuring GSM are adequately funded;
  • Supporting future D3M, Facilitator, and Protocol Owned Liquidity (POL) initiatives; and
  • Support efforts to integrate GHO to Centralized Exchanges, and fund managers.

Growth

As GHO continues to grow beyond Ethereum, our efforts will expand to support those new deployments to ensure adequate liquidity and peg stability is maintained. We will continue to work with teams that build with GHO and advocate for the adoption of GHO wherever practical.

When GHO is mature enough to support deploying Protocol Owned Liquidity, we will actively contribute to the creation of sGHO and balancing the needs for sGHO and stkGHO within the Aave ecosystem.

Aave Stack

Safety Module Management and Optimisation

The Safety Module (SM) currently presents exposure risks due to its reliance on the DAO’s native token and its deployment solely on the Ethereum blockchain.

With multiple instances of the SM being deployed, we will continue to perform the following:

  • Transition from AAVE emissions;
  • Introduce new categories;
  • Amend emission schedules; and,
  • Progressively align protocol exposure with SM holdings;

Aave Liquidity Network

With upcoming changes in the Aave product stack, including the Liquidity Network and the stablecoin’s multichain deployment, new challenges will arise in integrating these aspects with other products. We will actively participate in coordination and consulting to support the streamlined and successful deployment of these features.

Where practical, sunsetting of legacy v2 markets will be supported through continual parameter adjustments to encourage users to migrate to the latest instance of Aave Protocol.

By addressing these challenges, our team aims to support the DAO in achieving sustainable growth and resilience in a rapidly changing environment.

Specification

The createStream() method of the IAaveEcosystemReserveController will be called to create two streams with a start time block 1718673864:

karpatkey
Stream: 250k GHO over 180 days
Address: 0x58e6c7ab55aa9012eacca16d1ed4c15795669e1c

TokenLogic
Stream: 250k GHO over 180 days
Address: 0x3e4A9f478C0c13A15137Fc81e9d8269F127b4B40

TokenLogic and karpatkey are to be included in the Gas Rebate program that reimburses deployment and testings costs.

Disclaimer

TokenLogic and karpatkey receive no compensation beyond the Aave protocol for the creation of this proposal. TokenLogic and karpatkey are both delegates within the Aave ecosystem.

Copyright

Copyright and related rights waived via CC0.

10 Likes

Hello this proposal has full ACI support.

Previous engagement with “Aave Finance” ended last month; we are supportive of closing this payment gap at the proposed rate and then starting a 180-day stream engagement to avoid uncompensated work from service providers.

This will add ~100k GHO additional cost to overall budget but fair work deserve fair compensation.

In the future, we encourage service providers to publish their proposals in sync with their engagement periods to avoid accounting headaches and “catch up” amounts, even if we are all guilty (ACI included) of this. let’s all try to be as efficient as possible.

3 Likes

Hello,

I am in favour of this proposal and fully support it.
@karpatkey_TokenLogic have showed great work & results towards different areas.

I would still like to highlight a few points and have a few questions.

This sentence means that growth is exclusively to AAVE & GHO. This means that you as a service provider will not be able to work for Morpho, Spark/Maker.
I want to highlight this and have it confirmed as we have had seems this in the past with SP provider switching to competitors or working side by side with them while being contracted at the AAVE DAO.
I don’t want to accuse anyone of anything, instead I just want to make sure that it is clear to everyone involved.

I want to express my praise to this one.
TL did an amazting job here displaying several Aave & GHO related numbers and graphics. Its even being used by Defillama to display data.

For the next phase I would really like to see GHO grow even stronger and in best case seeing it as an asset included in other treasuries as GHO has proven to be a strong stablecoin for months now.

Could you also explain a bit how work is being split between KPK and TL?
Like what are the main areas KPK takes care of and what are the ones TL does?

In the end its important to be net positive on every spending the DAO has, including treasury manager. And GHO is the key to reach this goal.

Thank you and I am looking forward to another great 6 months!

2 Likes

As Aave’s service provider, we want to confirm our unwavering commitment to Aave & GHO. Our focus has always been and will continue to be on supporting and advancing the interests of Aave DAO.

To address your concerns specifically:

  1. TokenLogic and karpatkey are focused on the growth of GHO and Aave, which involves actively managing the DAO treasury and proactively supporting GHO’s expansion through the initiatives outlined in the proposal above. Neither TokenLogic or karpatkey are working for the aforementioned protocols.
  2. Both service providers share responsibility on all the aspects of the this proposal, with the work being split case by case depending on the workload of the contributors involved. This ensures a collaborative and flexible approach to managing tasks and responsibilities. We are the same team under this proposal.

A Snapshot vote has been created.

Start date Jul 22, 2024, 8:18 PM
End date Jul 25, 2024, 8:18 PM

Supportive of this proposal.

4 Likes

TokenLogic and Karpatkey have done a great job as Aave treasury managers and this is highlighted in Aave’s current financial position and the stability of GHO now, which is well-placed to continue its growth. We are glad that the Aave Liquidity Network considerations have been baked into this proposal since this will be a cornerstone of Aave v4 and beyond. We also agree with the need to stabilise the Safety Module and ensure that it does not pose an overexposure risk to Aave. Another aspect that @EzR3aL mentioned that is commendable is the Aave Analytics portion done by TokenLogic - it is incredibly important to hammer down on this and ensure its widespread usage across DeFi. The budget is definitely in line with expectations as well.

All in all, it is a no-brainer to vote YES in favour of this extension.

1 Like

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