title: [ARFC] TokenLogic Phase II - Extension
author: @TokenLogic
created: 2026-05-05
Summary
In response to the launch of Aave vV4 and recognizing Aave Labs’ role as the primary technical innovator, this proposal presents TokenLogic as the team responsible for managing finances and supporting operations at Aave.
Upon implementation, TokenLogic will be responsible for:
- Finances: Responsible for managing Aave’s finances, budget, reporting, KPI monitoring, user acquisition cost monitoring, popular use case analysis and investor relations insights in alignment with key stakeholders, such as Aave Labs.
- Market Structure: Provide market structure recommendations, perform capital-efficiency and interest-rate analyses, including Borrow Rate parameter recommendations, and design all incentive campaigns across Aave V3 and V4, in collaboration with other Service Providers.
- GHO Stablecoin: In conjunction with Aave Lab’s oversight, upgrade the GSMs to facilitate allocating to off-chain yield sources such as RWAs, develop cross-chain sGHO, and continue to lead the growth efforts supporting Aave’s GHO stablecoin.
- Tooling: Provide and maintain tooling, such as Aave Seatbelt, Aave Robot (using Chainlink’s CRE), bridging, and swaps, among others, for Aave V3 and V4.
- Liquidation Engine: Support Chainlink’s SVR rollout and upgrades; contribute quantitative analysis; present recommendations; collaborate with other service providers; and support the configuration of Aave V4 liquidation parameters to balance risk and expand revenue.
- Aave V4: Research and develop at least one Spoke that unlocks a new type of collateral, or that allows liquidity to move between networks using CRE. Responsible for leading efforts to develop the reinvestment feature strategy implementation and provide general operational support with asset onboardings and parameter updates via AIP.
- Business Development and Growth: Focusing on driving institutional adoption, strategic partnerships, and ecosystem growth across Aave Protocol.
Upon implementation, this proposal will cancel the existing 100072 stream and replace it with a new $2M Allowance, a new $2.5M EthLidoGHO stream and a new 5k AAVE stream over 12 months. The existing KPI’s remain unchanged.
Motivation
The launch of Aave V4 marks a defining moment for the protocol. As Aave’s architecture evolves to support modular spokes, composable hubs, and new product categories, the operational demands on the ecosystem grow in parallel. The recent restructuring of Aave’s service provider landscape has concentrated responsibility across fewer teams, requiring those that remain to broaden their scope and deepen their commitments.
TokenLogic has consistently delivered across treasury management, GHO development, incentive design, and analytics. At Aave’s request, over the past year, we have expanded well beyond our original mandate - driving business development initiatives that opened new networks, securing significant incentive partnerships, and building the tooling infrastructure that underpins Aave’s daily operations.
With fewer service providers and a significantly broader mandate, we are now responsible for delivering across finance, GHO, incentive design, tooling maintenance, V4 feature development, and business development. This proposal ensures TokenLogic is resourced to meet those demands and continue delivering at the pace that Aave’s growth requires.
Scope of Work
This section outlines the full scope of services to be provided by TokenLogic. Upon implementation, subject to a vote by AAVE token holders, this proposal replaces the existing Phase II proposal and recognizes TokenLogic’s new focus within the Aave ecosystem.
Whilst delivering the scope below, TokenLogic will work closely with Aave Labs, Certora, LlamaRisk, and other service providers to ensure product delivery schedules are executed seamlessly, with frequent and open internal communication among service providers throughout all stages of development and execution.
Finance
TokenLogic manages Aave’s financial operations, ensuring that protocol revenue is optimally allocated across growth initiatives, operational expenses, and strategic reserves. As Aave’s financial complexity grows with multichain deployments, new product lines, and an expanding set of strategic partnerships, a dedicated and proactive treasury function is essential to sustaining growth and maintaining long-term stability.
Treasury Management
TokenLogic focuses on ensuring the Aave DAO’s expenses and initiatives are funded efficiently. We support financial planning, budgeting, forecasting, risk management, and capital optimization to safeguard long-term stability. This will be performed collaboratively with each Service Provider, ensuring continuity and alignment across the various business verticals.
Our responsibilities span cash flow management, treasury operations, expense payments, and financial analysis, providing data-driven insights that guide strategic decision-making and business growth.
Core Functions
- Financial Planning & Analysis: Develop short and medium-term financial strategies, create budgets, and forecast future financial performance.
- Cashflow Management: Manage cash flow to ensure the DAO has sufficient funds to operate, pay suppliers, and invest in growth.
- Budget Allocation: Allocate budgets to different initiatives (e.g. Ink, Plasma, X-Layer) to ensure financial goals/commitments are met, and resources are used efficiently;
- Funding and Capital Management: Determine the preferred approach to managing the DAO’s funding needs, using a combination of cash flow and debt to support operations whilst maintaining exposure to underlying asset performance.
- Risk Management: Identify and manage financial risks to ensure the DAO’s financial stability and long-term prospects.
- Incentive Campaign: Provide input into strategic initiatives tenders alongside Aave Labs, and continue to design how incentives are distributed across Aave Protocol.
- Umbrella/Safety Module: Monitor users’ interactions with Umbrella and the Safety Module, review the yield relative to the broader market, budgeting in respect to cashflow allocation, and define emissions to optimize Aave DAO’s expenses.
Strategic Importance
As Aave continues to grow, we are witnessing an increase in the volume of strategic opportunities, rising cash flow demands, and suppressed market conditions, all of which require continuous, thorough analysis and oversight to avoid overcommitting funds whilst maintaining an aggressive pursuit of growth.
- Decision Support: Provide management with critical financial data and insights to support informed strategic and operational decisions.
- Profitability & Growth: Focus on improving profitability and generating cash, transforming the finance function into a valuable contributor to the business.
- Integration Performance: Create internal dashboards to track key integrations’ performance over time and evaluate the effectiveness of incentive budgets, user deposit growth, and user acquisition costs. These dashboards serve as internal decision-making tools for the Business Development teams to leverage and fine-tune competitive proposal submissions.
- Capital Management: Implement Buybacks, manage stkAAVE and stkABPT emissions, manage sGHO emissions, deploy assets to reduce incentive spend, and utilize loans as needed to support Aave DAO’s investments and strategic interests.
- Liquidity Management: Subject to the availability of capital, reduce the cost of AAVE and GHO liquidity by providing direct liquidity provisions.
- Data-Driven: Use analytics services and technologies to gather, synthesize, and visualize financial data, enabling data-driven decision-making across the organization.
- Aave Protocol Configuration: Collaborate with various teams to design the initial market structure configuration for new Aave V3 and V4 instances, strategically positioning Aave to maximize growth.
Asset Management Tooling
Continue to expand Aave’s financial stewardship tooling and introduce new asset management tooling to optimize and scale fund management. Whilst several initiatives are at various stages of development, this proposal summarizes the current status of existing tooling and outlines the next stage of development:
- Bridge Adapters: CCTP v2 for USDC and Layer0 for USDT bridge adapters are with @BGDLabs for a second round of review. The CCIP Bridge adapter was implemented for GHO to facilitate funding the RemoteGSM on the Plasma network. TokenLogic will continue to maintain existing adapters and introduce new destinations supporting managing Aave finances.
- Bridge Steward: Upon implementation of the Bridge Adapters, the focus shifts to the next stage: introducing an Admin Role to initially support the AFC in moving funds between networks without the need for monthly AIP votes, and only Allowance renewals. An initial Polygon-to-Ethereum Admin Role has been developed internally and is being tested. Arbitrum and Optimism are coming next.
- Finance Robot: Initially planned to be built on Gelato, the introduction of monthly fees has led to a shift towards using Chainlink’s CRE tooling to build the keeper system that will move funds between networks. The initial rationale for determining the amount and timing of funds transfers between Aave instances is maintained by an off-chain optimization engine.
- Position Management: Actively manage collateral position(s) on Aave Protocol to avoid liquidation. The lending position(s) management tool, namely the Anti-Liquidation Bot, after extensive testing and modelling, has been built using SAFE and Zodiac roles, and is currently at the internal review stage. This tooling is extended to support the Ahab SAFE activities and GHO liquidity positions.
- Swaps Steward: Permitting Aave Finance Stewards to swap funds held within the Treasury directly on their respective networks. Currently implemented on Ethereum, the intention is to introduce this to other networks as demand emerges.
- Liquidity Provisioning: Provide liquidity for both AAVE and GHO in secondary markets.
Analytics
Continue to build and maintain the Aave Analytics platform to provide users with the most up-to-date and detailed analysis of the Aave Protocol and Aave’s finances. TokenLogic will continue to expand the data analysis offering, providing new insights and creating an investor relations section.
- API Service: Provide users with access to granular Aave V3 and V4 data, with full history, via both a downloadable CSV file and an API endpoint to support financial modelling tooling.
- Investor Relations: In support of the broader transition towards a more sophisticated AAVE token holder base, TokenLogic will develop an investor relations dashboard that captures key performance metrics and data insights. The data will be made publicly available for others to incorporate.
- Protocol Revenue: Extend the detailed insights to include revenue by collateral type, debt type, Aave instance, and use cases primarily responsible for creating protocol revenue.
- GHO Revenue: Provide a detailed economic breakdown of GHO’s financial performance, including costs, various fees, and interest earned via GSMs.
- CAPEX & OPEX: Distinguishing between long-term asset investments and Aave’s day-to-day operational costs.
- Financial Reporting: Provide accrual-based financial reporting with a daily cadence, including the Income Statement, Holding Statement, and other key financial metrics.
- KPI & Performance Metrics: A deeper dive into the operational efficiency of the business, enabling conventional valuation models to be applied and monitoring the performance of specific growth programs and initiatives, such as service providers and strategic relationships.
- User Retention: After attracting new users or following an incentive campaign, assess user retention by duration, revenue generated, and acquisition cost to inform the refinement of future growth initiatives.
To further engage and educate the community, this initiative will be complemented by detailed threads/articles released throughout the mandate, promoting awareness and understanding of the platform’s developments.
Incentive Campaign
TokenLogic designs and iteratively optimizes incentive campaigns across all Aave deployments. Our approach combines rigorous quantitative analysis with close coordination across ecosystem partners to maximize the impact of every unit of incentive spend. We will draw upon input from Service Providers, LlamaRisk, and Aave Labs to align growth and risk management, providing a seamless user experience for Aave Protocol users.
- Campaign Design: Define target APRs, TVL objectives, and emission schedules for each market and asset pair, calibrating incentive intensity to prevailing market conditions and growth targets.
- Performance Analytics: Build and maintain an internal incentive reporting dashboard that tracks campaign ROI, user acquisition costs, TVL growth trajectories, and retention metrics to inform ongoing optimization.
- Partner Coordination: Work directly with partners to structure co-funded incentive programs that align partner budgets with Aave’s growth objectives.
- Sensitivity Analysis: Model the relationship between incentive spend and protocol outcomes (TVL, revenue, user growth) to support data-driven budget allocation decisions.
GHO Stablecoin
TokenLogic will continue to support the ongoing technical development in close collaboration with Aave Labs and drive the adoption of Aave’s GHO Stablecoin. The scope is broadly defined as five key areas.
Growth
After solidifying GHO’s strength and utility within the ecosystem, the next chapter of GHO’s growth will focus on unlocking new use cases and transforming GHO’s financial viability. TokenLogic will continue to introduce GHO to new networks, deepen integrations across CEXs, and introduce GHO as a payment option with various wallet providers.
- GHO Growth: Lead the growth and adoption of GHO, including Custodians, Wallets, CEX, DeFi integrations, and other opportunities.
- CEX Integrations: Continue onboarding GHO to CEXs and extending utility beyond Spot trading to Earn, Trading Accounts, and other opportunities.
- Aave V4: Design market structure to create both primary and secondary market opportunities with varying risk profiles. Deploy facilitators as required. When ready, pending the Aave Labs deployment schedule, support GHO fixed-rate and duration markets and customized lines of credit on Aave V4.
- Institutional Sales: Continue working with large institutions seeking to access credit on reliable terms across Horizon, Aave V3, and V4.
- GHO’s Economics: Expand GHO’s distribution to new collateral types via the Custodial Spoke on Aave V4, and upgrade collateral backing GHO’s yield-generation capability by introducing RWA to GSM.
Liquidity
TokenLogic will continue to lead the Aave Liquidity Committee (ALC), managing incentive allocation and liquidity operations across DEX and CEX venues.
Our key responsibilities include:
- Decentralized Exchange (DEX) Liquidity: Lead the ALC, calibrating votes and administering incentives across various platforms to direct incentives towards GHO liquidity pools.
- Centralised Exchange (CEX) Liquidity: Engage Market Makers and design and implement incentive campaigns.
- Operations: Claiming rewards, swaps, creating quests/bribes, and administering liquidity and vote incentives.
GHO Stewards
As GHO Stewards, TokenLogic will oversee the holistic maintenance of critical parameter configurations, including the Borrow Rate, GSM Caps, and Fees, to ensure optimal functionality and sustainability.
- Parameter Optimization: Strategic focus will be placed on managing the borrowing rate and peg relationship to maintain the resilience of the peg by retaining funds within the GSMs, whilst promoting the ongoing use of GHO within evolving market dynamics.
- Aave Savings Rate (ASR): Fund and maintain the ASR to ensure competitiveness in the broader market whilst balancing broader business revenue and expenses.
- sGHO Configuration: Provide analysis, maintain steward role access privileges, and configure the Aave Savings Rate (ASR) and supply cap.
- Synchronized Growth: Position GHO within the broader market to grow sustainably, whilst maintaining the peg and encouraging user growth via different instances of the Aave Protocol.
- Peg Stability: Continuously monitor and maintain GHO’s peg across CEXs and DEXs by analyzing liquidity, trading volumes, incentive effects, and broader market conditions.
Technical Development
Working closely with Aave Labs to synchronize delivery schedules, with product roadmaps, and various protocol upgrades, Tokenlogic will deliver:
- GHO Multichain: Extending GHO Lanes to new networks. Updating GhoReserve on Ethereum, deploying GhoReserves, deploying remoteGSM, and Gho Stewards on new networks.
- sGHO Multichain: Extend sGHO to new networks, initially Arbitrum, using CCIP. Develop a keeper system using CRE to support direct liquidity provision via a deposit contract on each network, with a strong retail-integration presence to streamline the retail user experience.
- GSM V4 Migration: Upon achieving sufficient growth, migrate stataUSDC/T GSMs from Aave V3 to V4 on Ethereum.
- GSM RWA Diversification: Develop a new GSM to support the allocation of RWA opportunities.
- GhoRouter: Update and maintain the GhoRouter to include new GSMs and sGHO routing.
- sGHO Steward: Deploy and maintain sGHO Steward contracts across new networks as sGHO expands via CCIP. Extend the steward’s permissions model to support extending sGHO to new networks.
RWA Exposure
To enhance GHO’s overall economics, we plan to allocate a portion of the stablecoins received from the GSMs to real-world opportunities that generate returns exceeding those of sGHO, thereby creating a positive carry trade.
- RWA Holdings: Engage an independent second legal opinion on the preferred legal structure on behalf of Aave in collaboration with Aave Labs and LlamaRisk.
- RWA Risk Analysis: Track, monitor, and report GHO’s RWA exposure. This includes high-level credit-worthiness risk analysis to determine overall allocation to each RWA backing GHO via direct GSM allocations.
Aave V3 and V4
Aave V4 Liquidation Analysis & Configuration
Aave V4 has a configurable liquidation engine that lets Aave determine how user positions can be liquidated. These parameters shape the trade-off between borrower protection and execution reliability and directly influence how the liquidation surplus is distributed among borrowers, liquidators, and the protocol.
- Expand Monitoring: Expand our monitoring to cover Aave V4, providing real-time insights and historical data on the Aave V4 liquidation engine configuration and its impact on users to support fine-tuning parameters. Our dashboard ensures ongoing transparency, accountability, and alignment with governance.
- Configure Liquidation Engine: Model and recommend liquidation parameter configurations tailored to different spoke objectives, with a focus on execution reliability, bad debt clearance, and revenue generation. Recommendations will be shared with the community for feedback before implementation.
Aave Umbrella
Umbrella is Aave’s native insolvency protection mechanism, introducing a Junior Tranche structure to absorb bad debt and enhancing Aave’s systemic resilience by enabling structured risk sharing with coordinated protection. During this engagement, we will work closely with other service providers to:
- Configure Umbrella: Focus on operationalizing Umbrella across active and upcoming deployments. Calibrate key parameters such as
maxEmissionPerYear(incremental yield compensating users for staking) andTarget Liquidity(optimal reserve coverage needed to mitigate tail risks) to ensure Aave continues to provide competitive rates and sufficient coverage. - Analytics Dashboard: Continue to provide the community with transparent, detailed insights into performance, capital efficiency, real-time analysis, and parameterization status/history.
Aave V3 and V4 Interest Rate Analysis
Interest rate parameters such as Base Rate, Slope1, UOptimal, and Slope2 determine how borrowing costs are priced across Aave markets, while Reserve Factor in Aave V3 and the equivalent Liquidity Fee in Aave V4 determine how borrower interest is split between suppliers and the DAO. Together, these are some of the protocol’s most important levers for balancing borrower demand, supplier competitiveness, utilization, and revenue generation.
- Interest Rate Recommendations: Publish recommendations for Base Rate, Slope1, UOptimal, Slope2, and relevant revenue-share parameters for stablecoin and volatile-asset markets across Aave V3 and V4 deployments, grounded in observed demand, utilization trends, competitive yield benchmarking, and the impact of these parameters on protocol revenue, market growth, and competitiveness.
- Kink Calibration: Flag markets where sustained utilization has diverged from UOptimal, indicating that the rate curve may be mispriced, either undercharging borrowers or suppressing demand through prematurely punitive rates.
- Utilisation Spike Analysis: After utilization spikes, assess whether Slope2 was sufficient to clear demand in a timely manner and recommend adjustments as needed.
- Protocol Fee Recommendations: When governance considers Reserve Factor changes in Aave V3, or Liquidity Fee changes in Aave V4, provide revenue impact analysis modelling the trade-off between increased DAO treasury income and supplier yield competitiveness.
- Cross-Deployment Consistency: Maintain a view across Aave deployments and flag instances where rate configurations are stale or misaligned with local market conditions.
Aave V3 and V4 SVR Monitoring & Configuration
SVR (Smart Value Recapture) is a Chainlink subsystem, currently integrated with Aave V3 and soon to be introduced in Aave V4, that redirects non-toxic liquidation MEV back to the protocol, creating an additional source of DAO revenue. Over time, the MEV share is increasing, averaging 52% and potentially reaching over 90% with further refinement. With over 11M in revenue generated to date, SVR is one of Aave’s key revenue drivers.
- Expand Monitoring: Continue to provide detailed insights into SVR’s performance via our analytics platform, and ensure data accuracy through our collaboration with Chainlink. We will expand our dashboards to support all future deployments, including Arbitrum, Base, other networks, and Aave V4.
- Data Liveliness: Upgrade data pipelines and indexing to support live data and reduce delay. This is specifically beneficial for monitoring wallet-level exposure analysis, identifying liquidation clusters, concentrations amongst users’ positions, and collateral dependencies.
- Expand SVR: We will support both Aave (execution-wise) and Chainlink (advising from the Aave perspective) in expanding the Aave-Chainlink SVR system across Aave deployments and improving recapture rates over time, while coordinating closely with other service providers and continuing BGDLabs efforts.
Aave V3 and V4 Tooling
Amidst the restructuring of responsibilities within Aave, TokenLogic will support by assuming responsibility for continuing to improve the DAO’s tooling from BGDLabs, including Helpers such as Aave Robot, Aave Seatbelt, address book, and permissions book. As normal, other service providers also contribute to the upkeep of this tooling.
- Aave Robot: Continue working with Chainlink to set up and operate the Aave DAO organization account on the CRE platform. TokenLogic will migrate existing bots across the CRE and continue to add support covering new networks and automating existing processes over time. Future Asset management tooling automation will be built using CRE to streamline on-chain Aave fund management.
- Aave Seatbelt: A governance proposal’s validation tool to increase the trust of AAVE voters in the validity of such proposals.
- Permission Book: Add new facilitators, steward roles, etc., as required; expand support to new networks like Monad; and enable compatibility with any new friendly fork instances.
- Address Book: Continue to support with maintenance and improvements.
Aave V4 - Technical Development
The following highlights TokenLogic’s technical contribution to the Aave V4 protocol, which will be carried out in close collaboration with Aave Labs, the primary technical team overseeing Aave V4 development. Our focus is on unlocking new revenue sources for Aave by expanding access to new collateral types and enhancing the protocol’s overall capital efficiency.
- Reinvestment Feature: Develop the reinvestment feature, controller/adapter, on Aave V4 to support deploying idle capital into a yield-generating source. The initial strategy will feature an integration with a USDC staking contract.
- Cross-Chain Spoke: Develop, in collaboration with Chainlink and/or Tether, a custom spoke to enable cross-chain liquidity allocations between Aave V4 instances.
- Finance Steward: Extend the Finance Steward roles and responsibilities to include Aave V4 for migrating funds, deploying idle assets, and facilitating swaps via Aave Swapper.
- General Proposal Support: Alongside other Service Providers, prepare Pull Requests to support the upkeep and maintenance of the protocol, such as Asset Listing and parameter changes.
Business Development
TokenLogic has been at the forefront of Aave’s business development efforts, driving strategic partnerships and network launches that have materially expanded the protocol’s reach and revenue. While not formally recognized under the previous scope, our contributions have delivered significant results:
- Network Launches: Led the operational lift for Aave’s expansion to X Layer and Mantle, coordinating market structure, incentive design, and partner relationships. Mantle has since crossed $1.4B in TVL, establishing itself as one of Aave’s highest-performing deployments.
- Incentive Partnerships: Secured $15M in incentive commitments for the Monad launch, positioning Aave to capture significant market share on a new L1.
- Wallet Integrations: Closed integration deals with MetaMask and OKX, expanding Aave’s distribution footprint across the most widely used Ethereum wallets.
- CEX Relationships: Through our GHO growth mandate, we maintain direct relationships with several major centralized exchanges, facilitating listings, Earn integrations, and liquidity partnerships.
- ETH Derivatives: Lead relationships with major liquid staking and re-staking protocols, Lido, Etherfi, and Kelp, ensuring Aave remains the primary destination for these assets.
- Plasma: Played a central role in establishing Aave’s Plasma instance and contributed to market design and early growth strategy.
Under this extended scope, in collaboration with Aave Labs, TokenLogic’s contribution to broader Business Development and Institutional Sales efforts is formally recognised:
- Business Development: TokenLogic will continue to lead select Business Development initiatives on behalf of Aave to expand Aave’s user base and deposits. Our focus will continue to be towards CEX, Custodians, Asset Issuers, and other institutions.
- Partner Relationships: Over the past year, TokenLogic secured several major partnerships on behalf of Aave and is currently the primary point of contact for these teams. TokenLogic will continue to be the primary point of contact for these teams and any future teams that TokenLogic leads in the integration effort.
- General Support: With Aave Labs providing business development support, TokenLogic will provide Aave Labs strategy and financial feasibility analysis support.
Specification
Upon implementation:
- TokenLogic’s contribution to the Aave ecosystem includes the scope of work defined in the Scope section above.
- Cancel Stream 100072, 2.5M aEthLidoGHO over 12 months.
- The existing KPI program remains unchanged.
- Create a 2M aEthLidoGHO Allowance.
- Create a 12-month, 2.5M aEthLidoGHO stream.
- Create a 12-month, 5k AAVE stream.
Following on from past funding updates, and for avoidance of doubt, the following costs are to be reimbursed through periodic funding updates:
- Audit Costs: Incurred when preparing Smart Contracts for deployment in delivering the above scope.
- Gas Costs: Incurred when performing operations on behalf of Aave.
- Legal Costs: Incurred when supporting GHOs and collateral backing GHOs, integration with institutions on behalf of Aave.
Each of the above reimbursable costs is to be shared with other Service Providers, ensuring full transparency and providing an opportunity to further refine spend where practical.
Next Steps
- Gather feedback from the community
- If consensus is reached, escalate this proposal to Snapshot
- If the Snapshot outcome is YAE, TokenLogic will proceed with implementation
Disclaimer
TokenLogic is an active service provider to the Aave DAO, the beneficiary of stream 100072 and the KPI as outlined in this publication. The scope of this engagement is available via this forum proposal.
TokenLogic supports and maintains an independent delegate voting platform within the Aave community.
TokenLogic and associated entities have no undisclosed material conflicts of interest at the time of submission.
Copyright
Copyright and related rights waived via CC0.