AAVE and Curve may have a long history of collaboration, but a recent proposal to further this alliance appears to be heading back to the drawing board.
The two protocols are consistently jostling for top spot by TVL on DeFiLlama.
Although commentators like to discuss a rivalry between Curve and other protocols, Curve and AAVE are historically quite chummy. The development of the two protocols have proceeded largely in tandem. Indeed, following the trusty 3pool, the AAVE pool is the very first pool by offset in the Curve registry.
The process for adding support for CRV on AAVE stretches back as far as October 2020. Similarly, when DeFi began spilling onto Polygon, the two protocols again integrated their offerings to the benefit of users:
A year ago when AAVE hit its first billion, they partly credited this feat to their composability with Curve.
Likewise, when Curve briefly flippened Aave on one tracker, everything was friendly.
So it’s not surprising that members of both protocols are pondering how to further this partnership.
From AAVE’s side, they have a massive war chest and are always in search of ways to use it to increase their token value. Their billions of dollars offers many great options for integrating with various DeFi protocols. They’ve been pondering such moves as far back as last November:
“We could and probably should also split the funds between differents protocoles to reduce risks, and maybe accumulate governance token like you said, so we could use curve to accumulate CRV, Yearn to compound stablecoins…”
At the close of July, @dydymoon1 pushed a proposal to trade governance tokens between the two protocols to the tune of $3MM. AAVE has millions of dollars within Curve, but like so many others, can’t lock enough $CRV to maximize their boosts. By their calculations, it “would require approximately 850k$ to get the maximum boost on the Curve pools.”
Rather than liquidate their funds to buy $CRV, they are proposing a trade of 2MM $CRV for 10,710 $AAVE. Among other benefits, this would give AAVE a greater say in governance on Curve’s forum, although they’d still be a relatively minor player in the lockening wars.
The proposal overwhelmingly passed on AAVE’s side.
Now the proposal has headed to the Curve forums. The benefits to Curve are detailed as follows:
While the proposal passed overwhelmingly on AAVE’s side, the Curve stakeholders are overwhelmingly opposed. Although commenters expressed positive feelings towards AAVE, they overwhelmingly felt this particular deal was one-sided.
@BitMane weighs in:
“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”
@WormholeOracle concurs, raising the necessity for a whitelist:
“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… On the other hand, I do think whitelisting Aave is necessary to improve relations fwiw."
@DeFiWhiskey adds:
“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.”
This snapshot vote is coming back overwhelmingly opposed.
With AAVE’s initial proposal spurned, it appears this will be headed back to the drawing board. Perhaps AAVE will simply purchase tokens on the open market. The initial proposal also debated Convex as an option, but wanted to wait and see what happens with Convex’s development. Perhaps Convex will be back under consideration?
The whole affair recalls the recent discussions at Sushi, where a consortium of VCs attempted to get $SUSHI at a discount and bumped into a skeptical community. Governance by DAO is proving exceptionally responsive to the feelings of stakeholders, except in cases where the governance mechanisms are mostly a facade. We hope the two protocols are able to work out a deal that benefits both parties.
For more info, check our live market data at https://curvemarketcap.com/ or our subscribe to our daily newsletter at https://curve.substack.com/. Nothing in our newsletter can be construed as financial advice. Author is a $CRV maximalist, has no position in $AAVE.
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