The core vision for Aave is to build a financial powerhouse rivalling some of the largest financial institutions in the world on open, permissionless rails. We are only a few years into this decades-long journey, and Aave has already become the undisputed market leader in DeFi, having gained a dominant lead in the crypto-native market; essentially, Aave is currently the biggest fish in what is a relatively small pond. However, the total prize up for grabs is all of finance, and Aave is now graduating from that pond to a shark-filled ocean where the competition isn’t just other DeFi protocols, but giants like Revolut, JP Morgan, Fidelity, BlackRock, and Robinhood.
The Vision
Stepping away from the governance discussion for a moment, the most compelling element of this proposal is its coherent, grand vision of a world powered by onchain finance. The pathway to challenging the largest financial institutions in the world is clear: to capture the “blue ocean” RWA and traditional finance market, such as fixed-rate lending, OTC lending, and debt trading, and bring them onchain under one unified Aave umbrella. Tangible products like Aave v4, Aave App, Aave Card, and Horizon are already either in production or very close to being launched to help capture this opportunity. Furthermore, an institutional product like the Aave ETF is one that only Aave Labs can feasibly take forward given its internal capabilities and the significant legal and regulatory engagement required, making it a very positive development to expand the reach of the Aave ecosystem and token to a broader audience.
Aave V3 to V4
Regarding the transition from Aave v3 to Aave v4, it is essential to recognise that products must constantly be improved and innovation does not stop, especially in this early stage of the protocol’s development (8 years is a very short time period). Aave v4 builds upon v3 and can ostensibly do everything v3 does, while enabling even greater functionality; this is the hallmark of progressive innovation, and if Aave wants to scale the pinnacle of finance, innovation must be embraced rather than pushed back against. We would ask Aave Labs to publish a technical paper addressing how v4 builds on v3 and expanding upon the analyses provided by Chaos Labs, TokenLogic, LlamaRisk, and other service providers.
It is clear that Aave Labs recognizes the value provided by v3 and is not proposing a sudden move to v4. Instead, the v3 Maintenance Plan reinforces safety and represents a measured approach to trialing v4 while ensuring Aave does not lose the benefits of v3, which is the right approach for such a significant protocol change.
Aave Brand Governance
Additionally, regarding Aave Brand Governance, establishing clear licensing processes and a Foundation or similar entity is the right path forward. As there is already broad alignment on this point, there is no need to comment further.
100% of Aave Product Revenues to the DAO
The most significant point here is the direction of 100% of Aave product revenues to the DAO, which is a novel move in the space that very clearly aligns incentives between all parties. The funding approach makes sense given this paradigm shift, and the amount requested is not absurd or extractive. In fact, the funding may even be too low given that Aave aims to compete with FinTech and finance behemoths in the immediate term. Aave is a high-growth scale-up, and trying to minimise spending or allocate a perfectly optimal level of funding for growth is almost impossible with the goal of achieving high growth.
In early-stage businesses, capital allocation is akin to taking many shots on goal. You might score with some and miss with others, but the point is to allocate capital as reasonably and at scale as possible to grow the pie and win the market. Therefore, the question of whether the funding ask is reasonable is answered with an unequivocal yes. Comparables provided by @Blockworks.Advisory show that companies like Ramp, Brex, and Revolut all had significantly higher burn rates of $60-100M, while protocols like Lido, Uniswap, and Sky all have higher budgets than what Aave Labs is requesting. We recommend reading the full Blockworks comment to understand why this ask is more than reasonable, especially considering the revenue that can be unlocked by new products and Aave v4 spokes, though we think it is fair to clearly define net revenue and its components.
Governance Concerns
Regarding governance concerns, trying to pick apart the “bundling” of different elements in a proposal where there is broad alignment will only lead to stasis, paralysis, and extreme operational and execution inefficiency. The goal is to compete with extremely well-capitalized and operationally efficient traditional firms. This proposal clearly demonstrates that incentives will be aligned between Labs and the DAO from here onwards. To ensure excellent execution, the DAO and contributors need to place trust in Labs, especially given the clear vision, the product roadmap, and the fact that feedback from discussions over the last few months has been absorbed.
Conclusion
While debate over certain elements like the definition of net revenue is healthy, and we would welcome a technical paper outlining the benefits of v4 over v3, the funding ask is financially very reasonable and ensures complete incentive alignment. Overall, we think this proposal is hugely positive and bullish for the Aave ecosystem.