As you know the gas costs have become a sort of a burden for a lost of the users, especially those who deal with lower amounts. While we are awaiting the proliferation of one or multiple L2 solutions, I am questioning the possibility of subsidizing the gas costs for Aave users until the L2 approach is feasible and provides a good user experience.
In this sense it is interesting to discuss and potentially implement a mechanism through which the protocol can sustain these costs in a sustainable way. My initial take concerns the use of protocol fees to cover the gas costs, however it is not clear to me what are the monthly gas expenses for Aave users and how do they compare to the fees generated from protocol usage. We need to see the stats regarding the aforementioned figures in order to gauge the fesability of this proposal.
My opinion is that, for now, an initiative like subsidizing gas costs on the protocol should be treated really carefully because the problem seems to be systemic of the Ethereum network, with the sustained high gas for several weeks.
Still, I agree that to model any future fee on the protocol, it’s fundamental to take a deep look at gas consumption by usage of the protocol (which basically it’s decently high right now).
I don’t think the protocol should bear the full burden of gas costs. But a discount, kind of like what Matcha offers for small trades, might be an incentive.
For example, gas costs matter for people lending/borrowing liquidity in the 100s or 1000s. A small discount that makes Aave cheaper compared to competitors could actually drive more usage/revenue if the gas discount is well known and publicised. Smaller fish will choose Aave over Compound because of the immediate savings via gas discounts, which will ultimately increase usage.
That said, this is not a sustainable solution on ETH 1.x so long as gas costs continue at current rates. Maybe a short/mid term solution till L2 solutions are more reliabl.
my personal opinion on this topic is that Aave has a multi-market approach, Uniswap and the upcoming Set protocol markets are example of this.
seems more efficient to start researching and experiment with one/several layers2 to replicate the Aave markets there and let the end-user decide where they want to provide liquidity.
Aave did a very successful campaign as a company with Argent to cover gas cost for their users interacting and even with a relatively small subset of the overall Aave userbase the cost was fairly high and if we decide to subsidy all Aave users,
If the governance vote for subsidizing the users gas cost, it may hurt other kinds of rewards or be a burden on the ecosystem rewards that can be used for more meaningful purposes.
I’m more in favor of optimization and build something sustainable on the longer term than subsidizing the issue and hoping for Gas Price to go back to nominal amounts.
A potential problem I see in the case of “supporting” with gas discounts the “Small fish” is that maybe the system could be abused somehow, sybyl attack style. Maybe something that could be protected, but I think it boils down to the risk/reward for the protocol itself.
L2 solution are still problematic by themselves on the case of the current Aave protocol, because, differently to other platforms more focused on short-term actions (exchanges for example), the overhead of using an L2 solution could even make more expensive the usage of the protocol. But I think it is something really really worth it to explore anyway.
I think that paying gas fees would kill the incentive for those who support the risk and the protocol, but, this is true than a discount on the gas could bring a lot of people, if it can be protected as mentionned.
However, this would be a good idea to support the voting fees, so the proposals on the governance would not be stopped by gas price (see YFI) and the protocol could easily reach enough votes at each time. The cost for this could be a lot less than paying all gas fees, but is acceptable for a good governance.
Maybe i should create a special topic on that ?
Looking forward to get more opinions :)
I doubt it’s worth targeting incentives towards users making micro deposits which are not gas efficient. On the other hand, if Aave can integrate with large exchanges or other platforms who can submit their clients’ transactions in batches to save on fees, that will drive a lot more volume.
Not sure how a sybil attack would be executed, but I understand the risk of spamming Aave with small txs (DDoS style). But, correct me if i’m wrong, this only affects the Aave frontend and the protocol itself. Either way, I think damage from incentivizing small txs is somewhat mitigated because it’s a discount, not completely free.
They would still need to burn quite a bit of $$.
One potential improvement is supporting gasToken. What could be done is enable users to burn the gasToken that they hold in their wallet
I agree that fully subsidizing the gas cost can be abused to some extent and there is no way to cover them without slashing some of the rewards for various stakeholder at least partially. This leads us to the question of which types of users leverage the protocol the most and whether incentivizing those outside this core user base is worth it in terms of volume of loans.
I think the Aave protocol should optimise gas cost / usage in the smart contract design, however any subsidising should be on the ‘app’ layer. Similar to the recent Argent campaign that MarcZeller mentioned above, ‘apps’ can compete on the UX side, which may involve subsidising gas costs.
Yeah I think subsidising gas costs for smaller fees is a cute idea, but something that should be avoided. As has been said it would take community funds away form reward pool for contributors. Also as has been said it is a problem form the wonderful thing of large scale Ethereum adoption, just how traffic jams are a problem of luckily a lot of people having the luxury of owning and driving their own car. Yes high gas fees for small transactions suck, but that’s also for the sake of not just AAVE but the whole ETH community everyone should try to be as efficient as possible with network usage in these times, and incentivising not doing that would not be the right thing to do.
ETH 2.0 will fix this and there are indeed layer 2 solutions to this like what the guys form Loopring are bringing, maybe that could be implemented on AAVE?
While covering the gas costs for smaller transactions definitely improves the UX (and helps the “little guys”), as others have mentioned it can easily be abused, not to mention it will be just burning cash with little benefit other than making some members happy.
Something I’ve seen done with Kyber (KyberSwap specifically) is that they cover the gas costs for transactions made if the user holds above X KNC, though only for limit order trades and not regular swaps.
This gives users more incentive to hold KNC, but if something similar was used for Aave it would likely only benefit those with big holdings who don’t need help covering transaction costs, and again would just burn cash.
So personally I think waiting for L2 solutions and eventually ETH 2.0 is the best route here given the circumstances.
edit: I do like @Emilio’s suggestion of supporting gasToken though, this could be a decent workaround until L2’s come into fruition, but then again it may also turn out to be a waste of development if gasToken is fully implemented and then shortly after a proper L2 is available that works for Aave.
+1 to @defidude comments.
Spending the AAVE reserve on gas seems to be a low value activity for the protocol, helping out small users is great but we’re aiming to build a trillion dollar protocol over the next decade (Have to think big & long term imo).
The development overhead is definitely something worth considering - hopefully the massive gas costs will be improved over short/medium term (L2, ETH2, etc)
gasToken could be a viable middle ground.
As mentioned by DeFiDude - there could be some system where ‘by having x amount of AAVE held in the SM addresses get gas paid for’ but that just seems to help users who already have $ regardless.
Overall: Ethereum & other layer 2 techs currently have scalability as a high priority. On top of this, using traditional finance costs thousands of dollars instead of tens of dollars, seems like not a massive roadblock.
We should consider linking up with Synthetix’s L2.
Aave’s commitment to another DeFi L2 could easily king make it, creating positive sum network effects.
@MarcZeller Is there any data as to the effectiveness of the Argent gas program? I know currently Dharma is subsidizing gas costs on uniswap, not sure how effective that is.
From a pure user acquisition p.o.v. Gas cost waiver should follow a first X number of transactions limit. This will reward low activity users and new users who are unfamiliar with ETH gas costs, while at the same time not subsidize high volume users.
I don’t have any data on the effectiveness itself that would definitely be better left for Marc, but I do know that both Dharma and Argent have been imposing limits and restrictions around their subsidized gas program.
For Dharma, when the gas limits were especially high they were imposing minimum swap limits of 1 ETH+ and things of that sort. Argent recently sent out an e-mail as well stating they’ll no longer be subsidizing the gas on transfers.
Given the restrictions they’ve had to impose it’s clear that it’s not a cheap way to go, but with Aave, contract interactions for a single user can exceed the gas costs of multiple regular transfers meaning it would only be much more expensive and unsustainable in Aave’s case I would think. For one user alone the act of depositing, borrowing, paying back, and withdrawing, could be upwards of $50 with the current gas prices (at least until v2 ).
I do love the idea of waiving the gas for new users following their first X number of transactions, but then comes the issues of it not being sybil resistant, so for me if I knew I was no longer going to get fee-free transactions I’d just transfer my stuff to a new address and then use Aave for the no fees.
HI All, new to AAVE but have some LEND. Just wanted to confirm how GAS is treated. As a newbie, I went through the migration process with 100 LEND. It cost about 18 dollars in ETH GAS to connect Meta to Avve and approve. Seemed ok but was pending for quite a while. Noticed I could speed it up for a few dollars of GAS but held tight. After the acceptance, it then cost 138 dollars of GAS to upgrade! That’s of course a huge hit on 1 avve at 430. Is that normal or what is meant by the small guy penalty? Would it be the same acceptance and upgrade cost if it migrating 1000 LEND? Is it related to the big rally in ETH? Thanks in advance for any insight. Look forward to being part of the community!