June 2023 Financial Report

[Llamaxyz]

Hi @benhoneill, thanks for your questions.

@benhoneill

• April revenues on Arbitrum v3 ballooned from low 5-figures to over $3m, which skews YTD metrics. Is this delta entirely made up from the $ARB air drop? Have any reports provided more information on this or details on how it will be used vs. the rest of the treasury? (Similar question for January on Ethereum v2)

The vast majority of the Arbitrum revenue in April did indeed stem from the ARB airdrop. There has already been some discussion about how Aave can use its ARB holdings, but ultimately it will be up to the DAO to decide how it is allocated.

@benhoneill

• Subtracted the above two anomalies, the DAO is operating at a P&L loss of >$6m YTD or ~$13m annualized loss. This provides <3 years of runway (excluding $AAVE tokens). Do you have a more accurate projection of this runway estimate? Have their been treasury or financial planning decisions discussed/proposed to work to extend this runway?

We have maintained an ongoing runway dashboard at community.llama.xyz/aave/runway which shows an amortized monthly spend of stablecoins and AAVE across vendors. This monthly expected stablecoin spend is $1.5m.

We’d also like to note that we’ve erred on the side of being conservative. These revenue estimates don’t include any potential income from GHO, which we believe could be very meaningful, both from GHO itself and from any associated TVL it brings to Aave.

However, if we remove revenue from the ARB airdrop as well as normalize January’s Ethereum V2 revenue to $700k (more on this below), we’d arrive at a monthly revenue figure of $1.2 million, resulting in a vendor deficit of $300k/month. With Aave’s stablecoin position of $25.9m, that would put the stablecoin runway at ~7 years ($26m / (300k *12)).

@benhoneill

• 3rd party expenses seems quite volatile, as well. Are there back up analyses to help the community understand how this was $7m in January, <$400k in two separate months, and $2m+ in others?

January was an anomaly in terms of expenses and included the following: 1) the repayment of excess CRV debt for $2.8m and 2) ~$1m in outflows to BGD ($700k aUSDC & $300k of AAVE). Cash basis accounting is used here and is consistent with our real-time dashboards, which account for flows. If a vendor waits to claim accrued earnings from the treasury, it may result in monthly fluctuations. We’ve attempted to smooth these fluctuations over in the runway dashboard by calculating an amortized monthly expenses figure.

Our reports work at an individual token and market level, so token swaps - while rare for Aave - can artificially inflate one line item depending on the inflows and outflows from the swap. In January, that looked like this:

Expenses

• $2.8m aUSDC spent to purchase CRV
• $2.8m worth of CRV tokens leaving the treasury to pay bad debt

Income

• $2.8m of CRV tokens received from the token purchase

If we were to net out the Income from the $2.8m of CRV, we’d arrive at $1.4m for Ethereum V2 in January, which is a more normalized figure. Likewise, the extraordinary expenses for January would be ~$3.8m ($2.8 CRV + $1m for BGD). There were roughly ~$500k in normal vendor expenses in January. Taking into account the $2.8m that is netted out in the Income section gets us to the $7.1m shown in the PDF.

When taking these factors into consideration for January, the YTD average vendor spend is ~$1.5m.

@benhoneill

• “Expenses do not include LM rewards on other chains…” (pg 25), I understand the reasoning behind this for near term financial reporting and agree with the exclusion from the analysis, but knowing these numbers will be critical to long-term planning so that we can understand the impact of partner chains potentially pulling incentives and their impact of Aave revenues.

At the moment, Aave actually has no LM expenses on other chains.

@benhoneill

Your initial proposal included a “Runway Analysis” and “Financial Data Analytics”, has this been completed or is there a ETD for this?

We published our first runway analysis in PDF format on the forum in December 2022. Following some community feedback, we got the sense that it made more sense to show this data on an ongoing basis so that the community could use it to make decisions about new vendor contracts. We published our runway dashboard earlier this spring. Outflows are updated real-time and revenue number assumptions are updated on a monthly basis. Please let us know if there are other things you’d like to see here!

Regarding the Financial Data Analytics, this was a part of our initial proposal that was removed in our updated proposal after feedback from the community that suggested we narrow our scope.