Propose an AAVE x CURVE Alliance

Summary:

Aave and Curve are two of the main DeFi protocols in constant evolution and growth with synergies between. One way of increasing these synergies would be to give each protocol some voting power in the other governance.

A few weeks ago, an Aave proposal was posted about a Curve strategy to increase the revenues earned by Aave DAO. However, to benefit from the Curve system in the most efficient way, it requires to lock CRV

Abstract:

Aave DAO is accumulating some CRV with the ecosystem collector, but not enough to boost the treasury from the ecosystem collector considering it’s now around 12.9M$ (or 851.2M$ including the ecosystem reserve). So how could Aave DAO get more CRV?

  • Buy CRV using part of the funds from the ecosystem collector, but this would require approximately 1M$ to get the maximum boost on the Curve pools.
  • Propose a token exchange between AAVE and CRV that increase the synergies created between both communities over the last year.

Motivation:

I would like to support the second option, especially because it would allow both communities to diversify their treasury without selling either Aave & Crv or spending additional stablecoins for this deal.

Treasury state:

CURVE:

Curve DAO mostly hold $CRV with 123.9M tokens worth 216M$, there is probably other addresses with stablecoins & other tokens, but I couldn’t find it.

AAVE:

  • Stablecoins: 1.22% of the DAO treasury worth 10.35M$
  • Ecosystem Reserve: 98.48% of the DAO treasury worth 838.3M$ in AAVE tokens
  • ETH/BTC & Governance tokens earned with the ecosystem collector including: 0.3% worth 2.54M$ (including CRV: 0.008% of the treasury worth 66K$)

If Curve DAO exchange 2M of CRV (currently worth 3.5M$) it would cost around 10510 $AAVE from the Aave ecosystem reserve at the current rates. However, some community members proposed to use a TWAP over a few weeks to avoid all manipulations.

If this proposal is approved, another topic will be opened to decide how and when to swap between both DAOs.

Purpose:

Aave and Curve are two main protocols in Defi. Both communities have aligned interests to see this exchange approved:

• Collaborate on a shared vision through governance in each other’s communities: The token exchange makes Aave and Curve governance stakeholders in one another’s communities. Each community will have influence in the other’s governance process, enabling them to best represent their interests and to collaborate

• Develop synergistic features: This could help create new Aave pools on Curve for the other money markets and using Curve pools as a collateral on Aave while earning Curve rewards for example.

• Positive alliance: This exchange can increase the synergies, the TVL and the revenues for both protocols. If Aave can vote to get more CRV distributed to Aave pools through the gauges, it should raise the Aave pools APR and so, increase the capital deposited in the pool which increase Curve revenues. Adding AAVE to the Curve war would also increase the difficulty for other players to increase their gauges.

For:

Benefits for CURVE:

  • Be a part of Aave governance (Vote on governance proposals, create AIPs)
  • Support of the “CRV lockening” by AAVE → Increase % of locked supply
  • Possibility to earn more AAVE (+BAL) by staking on the safety module
  • Opportunity to create a pool AAVE/StkAAVE or AAVE/sAAVE/StkAAVE
  • Use the AAVE tokens as a collateral
  • Diversify the treasury

Benefits for AAVE:

  • Be a part of Curve governance (Vote on governance proposals, gauges vote to increase the CRV distribution on Aave current and future pools)
  • Increase Aave DAO revenues by using Curve to deposit the treasury on boosted pools
  • Earn trading fees in 3CRV tokens by locking CRV 4 years
  • Earn EPS & other airdrops for veCRV holders
  • Diversify the treasury

Against:

  • Increase the gauges difficulty by adding a new governance participant that boost other pools

Poll:

I posted the same proposal on Aave last week with a snapshot vote supported by the Aave community with 99.33% votes for.

What think the Curve community about this?
Please share your opinions in the comments below & vote on snapshot: https://snapshot.org/#/curve.eth/proposal/QmbLJyafmXeToA3zGJYJ8D2VeMFvb2DTZxfVnqjGXVmQju
(the vote start a few hours after the post)

2 Likes

I believe CRV would be taking the majority of risk in this particular deal, considering the market cap difference between the projects. CRV is near bottom prices for this run already and Aave has a longer way to fall during a bear market. These types of deals are best done during down periods in the market where risk is the lowest for negative value fluctuations. Perhaps revisiting 1-2 years from now would be best for CRV & Aave

2 Likes

I’m in favor of whitelisting Aave if Aave wants to lock CRV either by earning it or using treasury funds to purchase it. The token swap deal wouldn’t benefit Curve tokenholders, though. We earn an admin fee on our veCRV, so a swap from the treasury is directly diluting existing holders. In some cases that might be acceptable, but I don’t see upside for Curve with this proposal. Lots of Curve DAO members are already active influential members in Aave governance, there’s already plenty of good synergy between Aave and Curve at the protocol level (which I hope to see continue and strengthen). A token swap isn’t necessary to improve relations. On the other hand, I do think whitelisting Aave is necessary to improve relations fwiw.

4 Likes

I also don’t see a need for a swap. The protocols can do collaborations without going down that road. It just hurts current token holders.

5 Likes

I think it’s great that you want to find synergies between Aave and Curve, two blue chip DeFi protocols that I believe will form the foundation of DeFi for many years to come. And as an added bonus to me personally, Curve and Aave are my two largest positions after Ethereum.

However, I don’t see the need to swap tokens. I think if diversification of the treasury is required, both projects can simply purchase those tokens on the open market in the exact amounts they require. No need for a protocol to protocol swap.

Also, Curve has rather unique tokenomics, and this is a motivator for other protocols that integrate to Curve to purchase and lock veCRV to increase returns. We see this with Yearn Finance and of course Convex, and others. Nothing to my knowledge is stopping Aave from doing the same, I believe.

But I don’t really see something comparable when Curve holds Aave governance tokens, at least at this time. Yes, Curve as a protocol can participate more actively in Aave governance, but individual CRV token holders can already do that now. I don’t see the benefits of Curve as a protocol doing it.

If Aave token holders would benefit from the protocol owning and locking more veCRV, my suggestion would be to lobby Aave token holders to use treasury funds to start purchasing and locking CRV! I think that makes more sense than swapping tokens, at least at this time.

But again, I think it’s an interesting and creative idea, and I’m definitely excited to see more cooperation between Aave and Curve. I just don’t think this is the way to go about it.

2 Likes