I would also like to see if there are any plans to add RWA products. I wish to see some institutional efforts towards AAVE ARC.
Johann from Chainlink here, it’s so great to see so many innovations for the industry in this new release. As usual, Aave is pioneering the future of this space, and we at Chainlink look forward to supporting making this vision come true across new oracle designs, protocol automations, RWAs, cross-chain liquidity, and so many other opportunities to pursue together. I am confident that the value delivered for the protocol and the space will be worth the effort, as the team has showcased so many times through its track record. Full support on the proposal!
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@ JohannEid Then maybe start with committing to match some % of this grant ;)
- I want to know where the money is used and what actual benefits it will generate. The expenses of each item need to be detailed to facilitate open and transparent supervision, rather than simply describing 20 million US dollars a year. Not a small number of people, right?
- It is now 2024. In this rapidly developing industry, is it realistic to plan for 2030? Of course we want the team to have a long-term vision, but we should also be down-to-earth. What kind of things are we going to do to change the world? Instead of imitating what is new in the industry today, or relying on money to defeat our competitors if they have something new.
- Has the AAVE team lost its entrepreneurial spirit? Lost your creativity? Are you focusing on the lens? We basically can’t see exciting products and improvements now. They are all step by step. Of course, we are the leader from a financial perspective, but there should be a lot more that can be done, right?
- I feel like the team is very stingy towards AAVE token holders and stingy towards users who pledge AAVE, but is very generous with their own expenses? You easily allocate 25% of your annual income to yourself, but can you allocate even 1% to AAVE holders?
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We greatly appreciate the community’s feedback and have carefully considered each point to refine our proposal accordingly across the following areas:
Auditing Costs
We are committed to maintaining the highest standards of security for the protocol. For this reason, once we have completed the development of Aave Protocol V4, in line with our development of past versions of the Aave Protocol, we plan to conduct 4-5 audits and pursue formal verification. However, in response to community feedback, we’ve decided to separate these costs from our main proposal and these will be shared closer to the time of release as we prepare for the audit. This will allow the DAO to assess these expenses independently, ensuring greater transparency and easier budget assessment.
Team Capability
While we believe that the size of the team does not directly determine the quality of the output, in response to the community’s request for greater transparency, we can disclose that the team internally allocated to building V4 currently would consist of around 15 dedicated personnel (composed of primarily end-to-end engineering, security research, QA, product and project management resources) which we would consider expanding during the course of our engagement. We believe the caliber of work and expertise required to develop a protocol as foundational as Aave necessitates a very highly skilled and experienced team. This has been the case for previous Aave Protocol versions developed by Aave Labs including V1, V2 and V3, and as such we believe the funding requested reflects the technical complexity of the proposed V4.
Revised Budget
In light of the feedback by the community, with regards to the budget, we have adjusted our funding request to $12m GHO, which includes $3m GHO upfront and $9m GHO streamed throughout the year. Additionally, we have removed the 25,000 AAVE payment. These changes underscore our dedication to responding to community feedback and represent our minimum acceptable budget to sustain the planned work.
We hope this information, and the proposed changes address the community’s feedback and demonstrates our commitment to transparency and delivering for the Aave community.
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Hey thanks for the reply. Appreciate all the necessary information, but I was not personally asking for a reduction of the budget but rather a budget breakdown. I think it is healthy that all service providers should have this in mind, a budget breakdown is much needed. Other DAOs like Maker and Balancer are doing it, why don’t we use that standard for us too?
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What do you mean? They did manage to fit “commitment”, “community feedback” and “transparency” in each of their responses / partners responses.
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Hello,
We would like to thank Avara for presenting this ambitious vision for Aave’s future.
Technical Perspective
We really love V4. V3 was a big upgrade from V2, and V4 feels like a giant leap. As we work all day on V3, we are aware of limitations and optimization opportunities, so this proposal includes plenty of exciting things. We could go find details in things we appreciate, but that would amount to restating the innovations presented in [TEMP CHECK] Aave Protocol V4 Development Proposal.
Proposal Scope:
There is no precedence of a new service provider being “engaged” for 12 months, as historically the DAO employs service providers for six months twice before doing larger agreements. we think it makes little sense to slow V4 development and add friction for Avara by forcing them to come back to the forum in six months to show progress. Therefore, we have no issue with a 12-month initial engagement.
Budget
In terms of budget: The initial one was well above reasonable, the current one is still very expensive (we’re nearly $1m per person actually working on it), and with the Audits cost on top, we’re reaching an expected $14m budget for 12 months, we believe there’s still optimization room with the budget. If the budget is approved as such, Avara will become both the largest service provider expense for the DAO (above all other service providers’ budgets combined) and represent more than one-third of the DAO’s overall budget. we’re concerned if this budget is approved, the DAO will face a large “compensation inflation” from service providers that would love to operate with the same profit margins as Avara.
However, we worked hard for the past 18 months, and we’re quite proud to say that we can afford it thanks to the efforts of several service providers such as Tokenlogic & Karpatkey. That said, if DAO revenue declines, we might need to cut some expenses or eat the treasury reserves. Personally, I think V4 is more important than Merit, even though merit is a great growth tool that generates DAO revenue.
What is certain is that in the current setup, I don’t see how we can cut the AAVE emission for stkAAVE and stkBPT in the safety module and replace them with GHO. The protocol will need to generate more revenue to allow it to be reconsidered. That’s a blow in our tokenomics roadmap, but the “Aave Chain” and unified liquidity vision are a paradigm shift in terms of Aave Tokenomics.
Community Culture
Avara is the starting point of everything we have now; their contribution is appreciated and known by all parties. What is proposed here is an important cultural shift with historical relationship.
This protocol started with Avara as the sole contributor and captain of the ship, then with maturity, the DAO grew stronger and we are now rich of an ecosystem of service providers adding value in a sustainable way with resources generated with actual economic activity of the protocol itself.
This proposal is widely different than the V3 proposal made almost two years ago. V3 proposal was “hey we made V3 we didn’t tell you shit about beforehand, here’s the code, give us 15 millions bucks + 1.3M for audits, bye”
Now this proposal is “Hey, we wanna build V4, we didn’t tell you shit about it beforehand but here’s what it is, and give us 12M$ + Audits and let’s get to work”
We are convinced Avara is well-intentioned about becoming an actual service provider and joining the DAO ecosystem of service providers. Their integration would be another step toward the DAO’s full decentralization and maturity.
We believe that, as service providers and delegates, we need to be welcoming and reinforce our DAO’s collaborative and coordination mindset. As such, we will encourage more communication between DAO actors and Avara. For example, to the best of our knowledge, most service providers had little to zero prior knowledge or ability to find synergies with Avara to contribute to the current proposal crafting.
The DAO already spent >2M$ on the best risk team of our ecosystem @ChaosLabs, we are convinced their input would have been valuable for the numerous risk-associated features of V4
The DAO already works with BGD labs on protocol-level contributions; the lack of coordination at the drawing board stage in this vertical is likely a missed opportunity for value add.
The DAO works with Aave Finance (TokenLogic & Karpatkey). Elements such as treasury management or new asset offboarding are part of their scope and will eventually be managed by them. To our knowledge, they had no idea before this proposal publication that new features would directly impact their scope and way of operating.
To ensure the success of this integration, it is essential that it works in both directions. Current DAO contributors must demonstrate a collaborative mindset by incorporating Avara’s expertise and potential into their own work, while also allowing Avara to leverage the collective knowledge and resources of the DAO other service providers.
By doing so, we can unlock new synergies and drive innovation, which will ultimately benefit the entire ecosystem.
With the ACI, we went from near zero communication & collaboration a year ago with Avara to currently synergizing for the frontend when a new asset is onboarded, building features that we propose to be integrated to the Avara-operated frontend such as the Merit APY, and collaborating on GHO strategies, steward, and liquidity committee.
We believe that the key to Avara’s successful integration into our DAO ecosystem of service providers lies in adopting a team-player mentality, rather than operating as a separate entity from other contributors. We recognize Avara’s good intentions and will encourage them to demonstrate this shift through their actions.
The ACI supports the proposal overall.
We are looking forward to work more with Avara in the future.
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How will Avara be working with @bgdlabs ?
Hi all,
Having taken our time to digest this proposal in its entirety and its impact on the future of Aave, we are of the firm belief that v4 is a huge step forward for the Aave protocol and DAO. Below, we will dive into aspects of the proposal we think have the potential to further cement Aave’s position as market leader.
In general, we think it is crucial for Aave to have a multi-year roadmap, especially in an industry that moves as fast as crypto. Having a North Star to build towards ensures that the direction of travel does not begin to drift and does not mean that the DAO does not possess the flexibility to continuously evaluate the roadmap, take stock of new innovations in the space, and incorporate them into the roadmap. Without having a multi-year plan, even though it may be more conceptual and higher-level at this point, the DAO risks losing ground to competitors that are either more nimble or have already established a long-term vision.
The features proposed can be bucketed into two camps:
(1) Long-term: Value levers creating value in the long-term, acting as the North Star and strengthening Aave’s competitive advantage.
(2) Short-term: Immediate benefits and improvements of the Aave protocol with short-term profit potential.
(1) Longer-Term Features & Vision
First, we will provide feedback on the North Star features that we think will be the cornerstone of Aave going forward in the longer-term:
- At this point, it is clear that the future is not limited to a singular chain, and with the rise of L2s and various other L1s, it is even more important to build for a future where liquidity is not fragmented and moves seamlessly across venues. To establish itself as the market leader in the face of growing competition in the space, we think a move like the Unified Liquidity Layer and the Aave Network will allow Aave to simplify UX, onboard many more users who can instantaneously access liquidity across chains, and scale faster to become a network-agnostic hub of liquidity across crypto. This is what Aave’s end-goal should be: the premier source of liquidity across crypto, across all networks. A move like this will allow Aave v4 to act as a base of liquidity that a variety of applications can draw from and utilise, and has the potential to act as a significant revenue source in the long run.
- The focus on GHO is great to see. GHO has the potential to print money for the DAO if executed correctly, and we’re happy to see that GHO’s progress is back on track with the efforts of the GLC and the Merit program after a somewhat shaky start last year. The emphasis on creating use cases for GHO (stablecoin interest paid in GHO, emergency redemption mechanism, the opt-in GHO soft liquidations, etc.) are a great sign of GHO powering the heart of Aave over the long-term.
- In our opinion, focusing on RWAs over the mid-to-long term is absolutely critical for a protocol like Aave. RWAs have long been perceived as one of the most important use cases of crypto and have only recently started to mature, beginning with more vanilla products like tokenised t-bills and potentially evolving into the financialisation and tokenisation of any kind of asset. For these tokenised assets to derive maximum capital efficiency, integrating with lending and borrowing protocols like Aave is of utmost importance so that users (both retail and institutional) can get the most value out of their assets; for example, look at the use cases proposed by @0xkeyrock.eth in their response. We are still in the early innings of the tokenisation of assets, with institutions only just starting to properly enter the space, and it is key for Aave to position itself as the premier venue for all kinds of users to gain capital efficiency from their tokenised assets. Chainlink, through CCIP and its various other efforts, is one of the leading players in the RWA space, and Aave is in a privileged position to be able to be one of the primary beneficiaries of Chainlink’s effort to open up and mature the RWA market. Therefore, indicating Aave’s keenness to onboard RWAs is a positive sign for more RWA providers to integrate with the protocol, and opens up numerous BD/partnership opportunities for the DAO while simultaneously being significantly value accretive for GHO in the long-term.
In summary, we believe the above 3 elements of the proposal will enable Aave to become more user-friendly and attractive for all types of users, position it as the premier liquidity hub across crypto, and as an effect, bolster and make crystal clear the protocol’s long-term value.
(2) Short-Term Features & Improvements
Secondly, we think the below aspects will bring more immediate value to the protocol in the near-term by improving risk management, UX, and reducing governance burden.
- The Aave liquidation engine is the cornerstone of the protocol and has allowed it to weather moments of great turbulence in this very volatile market. Further iterating on the liquidation engine by providing variable liquidation factors and liquidation bonuses will allow the DAO to capture more revenue from liquidations while keeping the protocol safe. Moreover, using different liquidation engines for different assets maximises user flexibility and accounts for the varied risk of crypto assets.
- Fuzzy-interest rates to automate slopes and kink points will make the protocol more efficient and reduce governance burden.
- The liquidity premiums, excess debt protection, and dynamic risk configuration make risk management much simpler and alleviate key issues that v1-3 have seen. The latter especially improves governance as well.
- Smart accounts will make the UX much better in the short-term.
- The automated assets offboarding feature also improves a process that has been ‘stitched together’ up to this point (albeit very well by the likes of Chaos Labs) and will reduce governance burden again.
We do not think the short and long-term feature development will happen consecutively - rather, it should happen in parallel, and we hope Aave Labs looks at it in the same way as well.
Budget
We appreciate the scrutiny and questions around the budget from the rest of the community - this is what decentralised governance and decision-making should look like! The breakdown in terms of team size and profiles from @AaveLabs is a good explanation of the resources needed for the first year, and stage-gating the budget is definitely a good idea given the relative unpredictability with DAO revenues and the general market. We are happy with the breakdown by type of team profiles and number of personnel, and the only remaining point of discussion would be around the size of the budget.
We also think @MarcZeller makes some good points around room for some optimisation of the budget and from a wider perspective, avoiding compensation inflation across the board.
However, given the financial position of the DAO at this point, plus the innovative new features brought to the table by v4, along with the need to continuously innovate and improve the protocol to fend off any competition, we think a good middle ground is to approve a budget for the first year with defined milestones in terms of what will be built over the course of the year and judge and consequently approve the budget for the following phase. We also think it may be beneficial to build in some ‘risk management’ aspects to the budget, i.e., if the market goes south and the DAO revenues reduce, there is no compromise on critical aspects like AAVE emissions or draining the treasury.
Closing Thoughts
All in all, we are in favour of Aave v4 and the roadmap outlined by @AaveLabs and are excited to have a longer-term vision for the protocol, which demonstrates the value it can potentially bring with GHO, RWAs, and the Aave Network as the North Stars that the DAO can continuously build towards.
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Hi Marc,
Where can we find information on the current roadmap for AAVE Tokenomics, checked the AAVE docs Aavenomics and flashpaper but am not finding a roadmap. Was curious what you were refering to here: " That’s a blow in our tokenomics roadmap , but the “Aave Chain” and unified liquidity vision are a paradigm shift in terms of Aave Tokenomics ." ?
We appreciate Avara addressing the need for a cohesive medium-term roadmap for the Aave Protocol. Having a defined direction for Service Providers to rally behind will only lead to a more efficient application of DAOs resources and provide investors with a clear multi-year roadmap investment thesis. Until now, the Aave DAO has excelled in operational execution and short-term planning with @bgdlabs leading the way for near-term technological advancements like Gov v3 and soon the revamped Safety Module.
Whilst there are many exciting features to be included in v4, this comment focuses on the DAOs finances. We welcome the amendment that removed audit costs from the proposed scope and revised the overall budget lower. In acknowledging that research has been ongoing for some time now, we recognise the effort made prior to the publication of this proposal by having an upfront payment. Removing the AAVE and rallying behind the broad adoption of GHO as the primary asset for DAO funding is appreciated.
However, similar to earlier comments we would like to see further cost optimization and more color when providing insights into how other Service Providers are to be included in the development of v4. Given the multi-year nature of this proposal, it would be beneficial for the DAO to understand more precisely defined Year 1 deliverables. The most recent @bgdlabs proposal is a great example of articulating scope and payment terms with precision. If the v4 development runs over schedule, the DAO would benefit from being able to assess what was expected and actually delivered. Similarly, if Avara is able to excel by delivering earlier, then the remainder of the stream can be brought forward; a new Year 2 stream could start earlier.
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We want to thank the community for the valuable feedback.
We were impressed by the strong turnout for the brainstorm around the direction of the proposal and the insightful contributions from everyone. The discussion around the V4, along with insights on the visual identity, sparked several new ideas and adjustments.
We are considering the proposal further and will post a new consolidated TEMP CHECK to reflect the latest thinking and feedback.
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I try to figure out what is a difference between ULL in AAVE v4 and CCLL from later vision.
what will be possible in AAVE v4: just easy moving aTokens between chains? or also deposit asset on chain X and use is as collateral to borrow on another chain Y?
how it will be extended layer with CCLL? one unified asset pool with the same rates on whether chain is used to supply/borrow?
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@retardedguru Unified Liquidity Layer means part of the architectural improvement on Aave Protocol, where liquidity exists in a dedicated (consolidated) layer, whereas other business logic (such as borrow module or liquidation engine) is plugged into the liquidity layer. This modular approach gives more flexibility to expand the protocol over time or support future upgrades with the less need for liquidity migrations. Mind that multiple liquidity layers can be supported to cater different use-cases.
Cross-Chain Liquidity Layer focuses on liquidity movements between markets that are deployed on different networks. CCLL means an improved version of the Aave portals.
New Temp Check proposal has been posted here for future feedback.
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thank you for you reply
to confirm I understand correctly
UNL is unifying liquidity on one chain
CCLL is a way to transfer liqudity across chains
None of them:
- allows me to supply on chain A and borrow on chain B (without moving supply from A to B)
- offers chain agnostic unified market for each asset. no matter which chain I use, I have access to the same liqudity and the same rates. i thought with AAVE Chain it would be place to host all the liqudity and markets that will be accessible from other chains (chain abstracted)
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Budget breakdown? Too high.