Title: Aave Permissionless Acqui-Hire Framework. Author: DAO Merger. Date: 2025-03-17
Summary: In a Darwinian world with (too) many tokens, there should be a way to conduct “acqui-hire” mergers, where the best-performing project (Aave) attracts talent. Hence we need a permissionless acqui-hire framework.
Motivation:
Incentivize Proven Value : Teams earn AAVE tokens only after demonstrating measurable contributions to Aave’s ecosystem. Meanwhile, they have to give up their hard-earned treasury and their inflated market caps dreams.
Aave Token Holder Benefit : The acqui-hired team’s treasury is repurposed to purchase AAVE tokens and reward their community with it, aligning incentives with Aave DAO.
Permissionless Efficiency : Minimize overhead using governance and pre-existing framework while maintaining Aave’s decentralized ethos.
Specification:
No change are required to the code.
Criteria for entry
The framework relies on a single vote after eligibility is confirmed.
Eligibility :
Team must prove control of a token with at least $50K in liquidity in AAVE tokens.
Team submits wallet addresses and a treasury address holding their funds.
Team makes a proposal outling the earn out terms and objectives
Execution :
Provided vote is positive :
Converts the treasury (e.g., ETH, stablecoins, or their native token) into AAVE via a DEX (e.g., Uniswap).
Distributes the resulting AAVE tokens to the team’s existing holders proportionally based on their token holdings (e.g., 1 OLD_TOKEN = X AAVE, determined by a fair market rate at conversion time) via a claim contract.
Burns or locks the old tokens to phase them out, ensuring a clean transition.
Earn-Out Condition Contract :
Defines the 3-month performance conditions for the team to earn AAVE. (e.g., TVL, Volumes, Features, BD, Research work …)
Defines the number of AAVE tokens the team would earn, only if the Earn-Out Condition is reached.
If conditions aren’t met, tokens are re-allocated to the Aave treasury
Tokenomics Impact Assessment :
Earn-Out Pool : Aave DAO allocates a fixed pool for acqui-hires, capped to prevent dilution. Only allocated if value is provided.
Demand Boost : Converted treasuries add to Aave’s demand.
Holder Increase: New holders gain exposure to AAVE, a more established token, increasing Aave’s community and staker base.
Challenges :
Holder Backlash : holders might resist the swap. Mitigation: they can always take their AAVE and sell immediately.
Scalability : Too many teams could strain the earn-out pool. Mitigation: Prioritize teams by treasury size.
Strategic Benefits for Aave DAO :
Talent Acquisition : Attracts skilled teams without upfront cost, only rewarding proven value.
Liquidity Growth : Converts small treasuries into AAVE, deepening market depth and staking power.
Ecosystem Expansion : Absorbs niche projects, in some cases even broadening Aave’s feature set (e.g., RWA).
Community Buy-In : Gives acqui-hired token holders a stake in Aave, fostering loyalty.
Next Steps:
If approved, this framework makes Aave DAO a permissionless talent and treasury aggregator. Teams earn AAVE only after hitting clear, Aave-aligned goals within 3 months, while their treasuries are swapped into AAVE for their holders—boosting Aave’s liquidity depth and reach. After 3 months, team can feel part of Aave DAO and make new proposals to bring more value. Or leave to create new things.
Disclaimer: DAO Merger as an investor in many other projects and in AAVE token could benefit if this happens.
The tokenomics don’t add up. “Swapping treasuries into AAVE” doesn’t magically create value. It just introduces sell pressure when acquired token holders dump their AAVE post-conversion.
Attracts skilled teams without upfront cost, only rewarding proven value after value is delivered
Converts ETH/USDC treasuries into AAVE, net buy whatever happens
Attracts net new AAVE holders
Benefit for team is less obvious as some teams would rather slow rug their treasuries into paying big salaries forever. But some teams are honest, they just have not found product market fit, or maybe they have not raised enough or something else happened. So giving them an opportunity to join a successful DAO such as Aave is win-win.
I’m still not sure tbh.
What kind of teams do you want to attract? Service provider like we already have? Or someone building on top of Aave?
We had a grants program and it ended for good. In my opinion there are other solutions and possibilities for the DAO to attract teams and help them with funding.
“possibilities for the DAO to attract teams and help them with funding” > what are these today?
And it’s a bit different tbh, proposal is quite the opposite. Here teams have to PAY (purchase AAVE tokens, and kill their own token in the process) in order to get the opportunity to work for the DAO. And they may (or may not) receive some compensation for their time AFTER 3 months of free work ends up creating some value.
So, I’ve read this several times now & whilst the proposal isn’t immediately clear if I’ve interpreted it correctly it can essentially be coalesced into
" Aave becomes a talent and treasury aggregator, with teams earning AAVE post-performance and treasuries boosting Aave’s market depth."
Based on that I have a number of questions that have not been addressed in the Temp Check.
Eligibility Threshold:
Is $50K in liquidity sufficient to filter serious projects, or could it invite low-quality teams to exploit the framework?
Should there be additional qualitative criteria (e.g., team reputation, project traction)?
Earn-Out Conditions:
How will “measurable contributions” (e.g., TVL, features) be objectively defined and verified to avoid disputes?
Are 3 months enough time for teams to deliver meaningful value, or could this timeline discourage complex contributions?
Tokenomics and Dilution:
What is the proposed size of the earn-out pool, and how will it be replenished without inflating AAVE supply excessively?
Who ensures the fixed pool doesn’t deplete quickly if multiple teams join?
Holder Impact:
What process is there to address potential backlash from acquired token holders who feel forced into the swap?
Could immediate selling of distributed AAVE tokens by disgruntled holders negatively affect AAVE’s price?
Scalability and Prioritization:
What process is there to prioritize teams if applications exceed the earn-out pool capacity—solely by treasury size, or other metrics?
What safeguards prevent the framework from being overwhelmed by low-value projects?
Strategic Alignment:
How will Aave ensure acquired teams’ goals align long-term with the daos beyond the 3-month earn-out period?
Governance Overhead:
While labeled “permissionless,” a vote is required—how will this avoid slowing down the process also who confirms eligibility, and how is this process kept decentralized?
Risk Management:
What prevents a malicious team from gaming the system (e.g., inflating liquidity temporarily to meet the $50K threshold)?
Who will handle legal or regulatory risks if acquired tokens have existing obligations or liabilities?
My Final Thought
In its current format there are currently far too many imponderables with to little recognised value accrual to Avve Dao so at this point I won’t be advocating this proceed to ARFC.
Agreed it requires more details. And actually a first acqui-hire operation could be needed before it can be generalized as a framework.
Trying to answer these excellent questions.
Eligibility Threshold:
Might require to verify a wallet with a minimum of 1,000 AAVE to start discussions and avoid spam proposals. Although it kind of duplicates with the governance process that requires a vote anyway. And feels awkward to negotiate with someone who’s going to dump AAVE tokens if she does not get her proposal approved.
Small treasuries (under $1m ?) should NOT be considered in the first year at least.
Earn-Out Conditions :
This would be a proposal made by the team. It can rely on the same DAO practices as to to when Service Providers make proposals.
3 months is a good trial period for both parties.
Tokenomics and Dilution :
This needs to start very small. Say 1 team brings $1m in AAVE. Earn out of $50k in AAVE seems fair.
Total Earn-Out for 2025 could be capped at $500k in AAVE
Should not accept more teams after Earn Out pool has been fully committed. Unless some teams give-up / do not deliver, then could reallocated.
Holder Impact :
If the swap is implemented as an uniswap pool, no holder would be forced into AAVE. An unhappy holder would just swap into ETH or USDC via Odos for instance (1inch does not use AAVE token as a pivot currency, but that is another story ).
Disgruntled holders cannot represent more than 100%. So even 90% sellers, means 10% of net buys.
Scalability and Prioritization :
Low-value or AI made proposals will always be an issue anyway for anything the DAO does. Can be addressed using Threshold as discussed above.
Strategic Alignment:
Some teams won’t fit or want to stay. But even if 20% do fit, that’s a huge achievement. And some holders will stay, that’s also a win.
Governance Overhead :
A proposal should be made by the team, following an updated & detailed version of this acqui-hire framework. And a vote should occur. So it is “permissionless” and welcoming. But not guaranteed to be accepted … Decentralized might be a better word than Permissionless.
Risk Management :
Inflating liquidity will have no impact, as the one metric that’s important here is the number of AAVE tokens that are actually purchased and distributed.
There are no “acquired tokens”, it is up to the team to offer the swap to its existing holders and all liability should be on the team. Aave DAO should have no liability as it would not ‘touch’ any token (neither old nor new).
Additional Thought
Aave DAO will need to compete for talent with Centralized entities and other DAOs. Showing an openness for such a framework could help.
Hi @DaoMerger thanks for all the effort you’ve put into this. However, at this point, we’re not entirely convinced of the value for Aave:
There’s a lot of sell pressure that can be induced through this strategy if there’s backlash from holders - that’s not ideal for the AAVE token. Moreover, the optics are worse if a significant portion of the new supply is sold. That could have negative secondary effects in the market.
The hypothesis is interesting but it’s entirely untested. Attracting skilled teams sounds like a good idea on paper, but what are practical examples of teams here? As you pointed out yourself, the incentive for many of these teams to partake is not clear.
We also agree with the points made by @MrKris - there’s still a lot of depth missing in the proposal, and while it’s a good and interesting idea, we’re not convinced of it at the moment.
I also realized a first acqui-hire operation could be needed before it can be generalized as a framework. Or maybe Areta can come up with a better framework.
Still I strongly disagree with your statement about sell pressure for AAVE token. It’s the complete opposite!!! Even if 90% of holders sell, that’s still 10% net buy…
).