[Temp Check] Allez Labs risk provider proposal to Aave DAO

Governance
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Summary

Allez Labs, a team of longstanding Aave risk contributors, solicits community feedback for a 6-month engagement with Aave DAO. Our goal is to deliver continuous risk management and R&D to the DAO. We aim to maintain and improve Aave’s strong risk standards and support Aave’s growth and development with a risk conscious approach.

Who we are

Allez Labs is a team of data and risk experts with deep experience with Aave and its community since 2019. We have been involved in nearly all risk events that have affected the protocol.

Allez Labs’ founding members

Alex BertoG: Former Risk Lead at Aave Companies, as part of the Genesis team, Alex has been pivotal in establishing and evolving Aave’s risk frameworks. Her extensive expertise allowed her to make significant contributions securing Aave’s stability and facilitating its growth. Over nearly four years, she was instrumental in establishing the DAO’s risk frameworks, setting V1 & initial risk parameters, onboarding risk providers, contributing to Aave’s design, managing crises, and supporting the launch of GHO. Socials: twitter, linkedin, lens

Khaled G: Former senior analyst at Block Analitica, he also worked as a quantitative researcher at Aave Companies for over a year under Alex’s leadership. He contributed to Aave by building quantitative risk frameworks, reviewing and providing feedback to service provider proposals/parameters/methodologies, developed from the ground up a simulation engine for Aave and the relevant DeFi primitives, helped manage crisis situations, contributed to GHO’s initial parameters and designed the first version of the GSM. Socials: twitter, linkedin

Matt Cole*: Former Staff Engineer (Data Scientist) at Aave Companies for the past two years, working on the risk team and later leading data efforts for Aave and GHO internally. He has constructed comprehensive Aave, GHO, and DeFi databases, assisted protocol engineering through simulations and quantitative analysis, and contributed to risk efforts by estimating impact of parameter changes and responding to crises. Previously Matt worked in digital market auction design as well as in traditional finance conducting collateral modeling. Socials: twitter, linkedin, lens
*available March 29th 2024

Our Mission

Our mission is simple - to deliver the research, data, and tooling to best position our clients for success in the ever changing DeFi ecosystem. We will achieve this through thoughtful and deep quantitative and qualitative analysis, community engagement and empowerment, and promoting a culture of transparency and collaboration. By integrating these principles into our approach, we envision a future where Aave sets new industry standards for risk management and operational excellence, driving sustainable growth and securing user trust across the DeFi ecosystem.

Our Values

Impactful Contribution: Allez Labs prioritizes areas where our expertise can significantly enhance the protocol’s stability and growth. Through strategic focus and dedicated effort, we believe that our work can lead to substantial improvements, driving Aave towards achieving its full potential in the DeFi landscape. Our roadmap adapts based on the most pressing needs of the DAO, and where we can have the greatest impact.

Community-Centric Innovation: Our approach to risk management is deeply rooted in serving the community. We utilize transparent, robust methodologies to deliver risk recommendations that are both effective and intuitive, reflecting the dynamic nature of DeFi markets and the needs of the DAO. Allez Labs is committed to democratizing access to risk insights, offering the community tools and reports that require deep expertise and data to build yet are accessible to the wider community. By focusing on clarity, we will empower the community with the knowledge needed for sound decision-making, thereby contributing to a more resilient and vibrant Aave ecosystem.

Transparency: We champion transparency as a pillar of the DeFi ecosystem. By fostering the development and adoption of transparent methodologies, such as open sourcing code and frameworks, we aim to create a culture of mutual growth and innovation. This philosophy is rooted in our belief that progress in the DeFi space is a collective journey, propelled by shared knowledge and collaboration.

Empowering Autonomy: Central to our ethos is the goal of minimizing dependency on any single service provider, including ourselves. We envision a future where the Aave DAO is equipped with the knowledge and tools to independently manage risk. To this end, we are dedicated to open-sourcing our data pipelines and models, ensuring that our contributions have a lasting impact and support the DAO’s journey towards self-reliance. Our objective is clear: to build a foundation that not only serves immediate needs but also empowers future generations of the Aave community.

Our approach as a risk provider

Our focus is on providing clear, actionable risk management insights that enhance understanding of the interplay between growth opportunities and potential risks. Through transparent methodologies and open communication, we commit to empowering the Aave DAO with the knowledge needed for informed decision-making, thereby fostering a proactive, risk-aware community.

Our mission is aligned with the evolving priorities of the Aave DAO and its stakeholders. Whether the focus shifts towards GHO, Liquid Staking Tokens (LSTs), Liquid Restaking Tokens (LRTs), or other areas of interest, Allez Labs is dedicated to adapting our resources to meet these needs. By maintaining a flexible approach, we ensure that while we concentrate on the DAO’s current priorities, we also keep a vigilant eye on the broader risk landscape. Our goal is to provide targeted, relevant contributions that not only address immediate concerns but also strengthen Aave’s resilience and strategic position in the long term.

Proposal

Allez Labs proposes to partner with Aave DAO, leveraging our extensive experience in risk management and our commitment to open-source principles to enhance the protocol’s stability and growth across Aave V3 and GHO. Our mission is to protect Aave from a broad spectrum of risks through employing a holistic strategy that not only focuses on mitigating immediate threats through qualitative and quantitative modeling, but also on embedding long-term risk management solutions into the protocol’s design. With a focus on transparency, community engagement, and open-source development, we pledge to empower the Aave community with the knowledge and tools necessary for informed decision-making, fostering a more robust, inclusive, and thriving ecosystem.

Scope

Aave V3

  • Asset Listing Support: We will provide analysis for new asset listings on all V3 markets for all assets that pass the Temp Check stage.
  • New Deployment Risk Assessments: Aave V3 is now active on 10 chains and we anticipate the DAO will vote to explore additional networks in the upcoming year. As such, we will provide market risk and liquidity assessments for new deployment proposals as well as initial assets and parameterizations for these new networks.
  • Ad Hoc Parameter Recommendations: Recognizing Chaos Labs’ effective and proactive adjustments to market parameters, Allez Labs will offer supplementary analyses and strategic recommendations for V3 market parameters, targeting enhanced ecosystem stability and refined risk management.
  • LRT Listing Framework: As Liquid Restaking Tokens become increasingly popular, Allez Labs will create and publish a LRT listing framework with support from the greater Aave community to best onboard and manage these assets within the Aave ecosystem.

GHO

  • Aave V3 Facilitator Parameterization: This includes parameter recommendations to manage market and liquidity risks, while ensuring GHO’s competitiveness. Parameters to be tuned are borrow cap, interest rates, and stkAAVE discounts.
  • GHO Peg Stability: Our team will develop strategies to minimize peg volatility and drive GHO growth through renewed trust in GHO’s stability, allowing for increased GHO borrow caps. We will work with the GHO Liquidity Committee to supply relevant GHO peg analysis and data.
  • GSM Parameterization: Adjust the GHO Stability Module parameters to most effectively support GHO’s peg.
  • Support Cross-Chain GHO Rollout: Allez Labs will conduct analyses to assess and mitigate risks associated with the cross-chain expansion of GHO, guided by the initiative and framework set by Aave Labs.

Protocol

  • Risk Steward: Take on the role as the second service provider on the risk steward multistig.
  • Incident Response: As needed, when emergency security threats arise, we will provide guidance, threat and impact analyses in order to mitigate the threats.
  • Automated Risk Management: We will work with other risk providers and stakeholders to begin development of risk parameter automation strategies to streamline the DAO’s risk process where the trade offs are clear. These may include:
    • Automation around WETH interest rate parameters which are primarily driven by LST yield
    • Automation around Supply and Borrow caps for new deployments

Roadmap

  • Immediate: Ad hoc risk parameter recommendations for V3 Ethereum, Arbitrum, Optimism, Polygon, and Avalanche markets, support for GHO related items, assume risk stewardship responsibilities, new deployment risk assessments.
  • Short-Term Objectives (First 3 Months): Active risk parameter recommendations on GHO and all remaining active V3 markets, support for GSM parameterization and remaining GHO items. Risk analysis work for cross-chain GHO.
  • Med-Term Objectives (Following 3 Months): Automated risk management development report, LRT listing framework publication.

Requested Budget

For the operations of Allez Labs over a 6-month period a budget of $400,000 is proposed. This budget will enable us to cover operational costs including, but not limited:

  • Legal fees
  • Node and data provider subscriptions
  • Cloud costs
  • Salaries, and hiring of additional analysts and developers as needed

Terms

  • 6-month engagement
  • 400,000 GHO streamed linearly throughout the engagement

Evaluation Metrics

From the DAO’s experience with service providers, inspired by BGDs proposal, the following metrics are good measures of performance:

  • Monthly recaps of Allez Labs’ contributions to the DAO with tracking of the progress on the scope and various contributions.
  • Provable participation and/or delivery of the projects described in the scope.
  • Direct or indirect participation in projects of other fields of contribution.
  • Feedback from other contributors and DAO members.
  • Direct and transparent engagement with the DAO via this governance forum.

Next Steps

  1. Engage with the community and other service provides to refine the proposal
  2. Escalate the proposal strengthened by stakeholders’ feedback to ARFC
  3. Execution upon approval
  4. Immediate support for GHO, Aave V3 Ethereum, Arbitrum, Polygon, Optimism and Avalanche.
  5. Support for all Aave V3 markets along the timeline proposed.

Copyright and related rights waived under CC0

20 Likes
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Strongly strongly supportive of this team, they would be an amazing addition to Chaos to properly secure the Aave Protocol!

6 Likes
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Massive level of risk knowledge available here, I think it’s a great move for the DAO to have Alex & co onboard.

8 Likes
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I have personally witnessed each member of this team’s passion for the Aave Protocol and risk analysis. They are each some of the most skilled in the space in their respective areas and have extensive knowledge, and history, of/with the DAO and its providers. Excited to see how this develops!

7 Likes
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This is fantastic information, of course I support it!

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Thank you for your proposal as a potential risk provider.
Currently the DAO is already voting on LlamaRisk, another service provider who created a proposal probably a week ago.
I think the main difference between these two is that Llama is having an edge in terms of stablecoin research and risk management through their work with Curve and other stablecoins.

Allez Labs consists of ex Aave/Avara member who have worked for Aave’s risk in the past. So they know Aave well.

Right now the biggest challenge for the DAO is to let GHO grow and hold its peg. And I think this is where LlamaRisk could be the better choice right now. Together with chaos they are bringing expertise in different sector.
As the voting for Llama was already open before this post and Llama answered all my questions I voted for them with YES.

Now there is the question if the DAO needs a third risk team for the future. In the past we were good with two (or maybe lets say one).

I’ll let the DAO decide. Every delegate should do their due diligence on both and then decide if the DAO will stick with two or three RP in the future.

Good luck!

2 Likes
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@Alex_BertoG is probably one of the most enthusiastic & dedicated people I had the pleasure to work with in the aave ecosystem. For me the emphasis on open-source makes a lot of sense as:

  • best case RPs could collaborate on certain things,
  • worst case new RPs or simply interested ppl would not need to start from scratch, but pickup were others left off

Therefore in general i’m supportive of this proposal to onboard alex & co.

I think @EzR3aL has some point though.
Probably not everything profits from 2 redundancies :man_shrugging:

7 Likes
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Scope of work is useful to see but as with all service providers and particularly risk, scope is quickly ignored because when work needs to be done, it will get done. Either through an existing service provider or elsewhere.

The price of service provider should not be a factor in deciding who the second risk provider is. I believe this is a place where @AaveLabs @ACI or @bgdlabs should simply set a price for the 6 month engagement so that prospective service providers do not get into a bidding war.

2 Likes
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Thank you EzR3aL for the chance to clarify a few things.

In fact, Allez Labs stablecoin experience is similar to that of LlamaRisk, given Curve and Aave started working on their respective stablecoins at a similar time. The members of Allez Labs were deeply involved since the ideation of GHO, in particular we simulated aspects of the stablecoin ecosystem to propose GHO’s genesis parameters. In parallel, we designed the first versions of the GSM with novel mechanisms such as freeze, pricing and fee strategies, and developed stkGHO discount strategies to name a few. For the last year at Avara, Matt has been continuously involved in the monitoring of GHO. Further, through his work at Block Analitica Khaled has been involved in the various stability and growth strategies of DAI.

Our proposal explicitly supports GHO’s peg and growth through several mechanisms including the V3 Facilitator parameterization and asset support, risk analysis surrounding new GHO facilitators, and GSM parameterization.

GHO is indeed a strategic focus for Aave, and on the margin is the highest revenue generating asset across all Aave markets and we’ve made it central to our proposal. As mentioned above our team has extensive experience with GHO and we believe we can have the highest impact there in collaboration with other providers.

Currently the DAO is undergoing a snapshot TEMP CHECK for onboarding Llama Risk as a service provider to the DAO. This is to gauge community sentiment on whether the proposal is relevant to the DAO, rather than a binding proposal approval vote which only comes after the discussions of the ARFC phase. We believe having options allows the DAO to position itself better to negotiate the best offering based on detailed discussions.

13 Likes
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Echoing our comment on the LlamRisk proposal, it is great to see more teams engage with the DAO on risk management!

We worked with members of the Allez Labs team during their days at Aave Companies and were always impressed by their professionalism and dedication. Their deep understanding of the protocol and GHO positions them well to contribute significantly to the community.

We at Chaos Labs are ready and eager to work alongside another risk service provider and look forward to the outcome of the upcoming votes!

11 Likes
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I support this. Alex was part of the Aave genesis team, evaluating risk and parameters for the protocol when there was hardly any TVL. She has a lot of lived experience and a good intuition of what is needed from a risk perspective. I believe having multiple parties evaluate risk from different perspectives and experiences is a net positive for the protocol, similar to how we’d work with multiple security auditors to minimise the risk of vulnerabilities.

5 Likes
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Based on this proposal and the people contributing to Allez Labs, I’m in strong support of onboarding the Allez Labs team as a risk provider within Aave. Alex, Khaled, and Matt all have extensive knowledge about market parameterization and, without a doubt, @Alex_BertoG and Matt will bring extensive knowledge about the Aave protocol as Allez contributors.

While there is some overlap between Allez Labs and LlamaRisk, I don’t believe the cost will cumbersome for the DAO. Given that Gauntlet’s previous engagement was for $1.6M over a one (1) year period and they’ve since left the DAO as a risk provider, the same level of funding could onboard two (2) highly knowledgeable service providers that can complement the work that Chaos Labs is already doing within Aave with funds left over.

Based on the previous budget for risk providers ($3.2M), AAVE holders could have three (3) risk providers for a total cost of $2.9M:

  • Chaos Labs 12-month engagement for $1.6M
  • Proposed Allez Labs engagement for 6mos @ $400k ($800k annualized)
  • Proposed LlamaRisk engagement for 6mos @ $250k ($500k annualized)

This would still cost less than the cost for two providers based on the cost for Chaos Labs plus the previous cost for the 12mo engagement with Gauntlet, which Gauntlet has since cut short.

I believe in the next year, we’ll see massive growth within Aave v3 and an uptick in GHO adoption. Given an unprecedented opportunity to expand across networks and onboard new assets (e.g., more LSTs, LRTs), it may be time to consider two (2) dedicated service providers focused on the Aave markets and one primarily focused on GHO. All service providers can collaborate across these initiatives, but it seems we’re at an inflection point where specialization and focus could hugely benefit the DAO.

5 Likes
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Hello,

With the ACI we’ll be supportive of this TEMP CHECK, As we have 3 different proposals for a Risk service provider slot,

We do not consider an efficient ressource allocation to have more than two Risk service providers.

We suggest that at ARFC stage, the candidates that received a positive TEMP CHECK snapshot vote outcome to be in sync at ARFC to ensure equal opportunity and representation and allow everyone to have a fair shot to present their SP candidacy to the Aave community.

After a sufficient debate period, we suggest a single ranked voting ARFC snapshot vote to allow governance to express their preference.

4 Likes
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The current proposal has been escalated to TEMP CHECK Snapshot.

Vote will start tomorrow, we encourage everyone to participate.

2 Likes
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The Allez Labs team has a significant amount of experience on Aave that will be very beneficial for the protocol going forward. They have worked previously with Chaos Labs, with whom it is necessary for any risk provider to have a good working relationship. Moreover, the scope of work is broad and touches upon the right points, with the focus on GHO being absolutely critical as a potential money printer for the DAO over the mid term. Given the amount that was being paid to Gauntlet, the $400k budget over 6 months is not excessive at all, and if paid to the right contributors, is worth a lot to the DAO. Obviously, the scope and price must be considered in comparison with the other applicants, LlamaRisk and OpenBlock. The open sourcing of all data pipelines and models is a huge plus.

There is only one question to be answered before the risk providers are compared in the ARFC phase: Allez Labs has a good amount of stablecoin experience, but it must be said that the launch of GHO was not perfect, with the depegs, lack of organic usage and integrations across the ecosystem, and the lack of established liquidity pools prior to GHO’s launch. This is obviously not attributable solely to Allez Labs team, but given that they have mentioned their deep experience with GHO pre-launch, this is a question that needs to be asked.

5 Likes
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I have personally witnessed each member of this team’s passion for the Aave Protocol and risk analysis. They are each some of the most skilled in the space in their respective areas and have extensive knowledge, and history, of/with the DAO and its providers. Excited to see how this develops!

1 Like
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Thank you for your feedback and for recognizing the expertise and value Allez Labs brings to Aave’s risk management efforts. We appreciate your acknowledgement of our team’s substantial experience with Aave and GHO. Our comprehensive scope, especially our focus on GHO, is designed to leverage such opportunities for the DAO’s benefit.

In response to the concerns raised about the GHO launch, we acknowledge that the rollout encountered challenges. At the time of GHO’s launch, two of our contributors had recently departed from the company, with Matt shifting his focus from Aave risk to more general data as GHOs direction became governed by the DAO. During this time, Matt continued to conduct many internal analyses, ranging from risk assessments of GHOs collateralization and revenue to more technical impact analyses such as the AIP 308, rather than governance.

Our initial parameter recommendations aimed at a conservative launch to ensure a solid foundation and long-term sustainability. The final parameters favored more aggressive growth with lower rates, contributing to the initial difficulties with the peg.

Moreover, our team developed the initial version of the GHO Stability Module (GSM), which, upon activation, can serve as a pivotal solution for the peg.

We are excited about the prospect of contributing to Aave through Allez Labs with direct involvement in the protocol and forum.

3 Likes