TLDR: Aave, the leading DeFi liquidity protocol, has a thriving grants program called Aave Grants DAO (AGD). AGD operates as a sub-DAO and is requesting $4m in funding for two quarters from the Aave DAO.
“Grants programs keep the innovative and collaborative spirit of open source alive and kicking.” Successful Grants Programs in Web3 History, Gitcoin blog.
Aave Grants DAO (AGD) has been in existence since May of 2021, and has operated continuously since then via periodic renewals approved by the Aave DAO. As detailed in their most recent proposal, AGD has awarded almost $4.4m since inception. They’ve also funded bounties at hackathons and hosted rAAVEs (Aave-themed dance parties, observed with approval even by The Economist), all in the effort to — as the team puts it — “proliferate the ghost.” This means: “strengthening the culture around Aave to make it a top ecosystem devs think of to build on and the first place consumers think of when deciding where to transact.”
The Proposal: Aave Grants DAO Update & Renewal
Aave Grants DAO requested $1m at its founding to fund two quarters of work; AGD’s two subsequent proposals increased the asks significantly by requesting $2m and then $3m per quarter. This time around, however, in its fourth funding request, AGD is reducing the ask to $2m per quarter. The proposal identifies three broad “shifts” that account for changes to the request. First, it is noted that the wider Aave DAO community has expressed “increased prudence” in how the treasury is spent; second, the DAO has long-term engagements with several third-party entities (BGD Labs, Certora, and Llama among others) that are responsible for areas that prospective grantees might normally consider; and third, there is more focus on events such as conferences, where AGD has worked to “create memorable experiences” that invigorate the community and advance the protocol. (The proposal argues that events will become especially important to generate awareness and adoption of the stablecoin GHO when it launches.)
Of the total budget, $1.8m is expected to be awarded to grants, ~$1.85m to sponsoring events and other marketing, and $350k to the operations budget (which includes AGD members’ compensation). AGD asks for 70% of their funding to be distributed in USDC and the remainder in AAVE. Pending legal review, AGD may establish an entity to facilitate entering into contracts with other organizations (and protect DAO contributors).
A final change is that Bill will be taking over as AGD Lead; Shreyas Hariharan (co-founder of Llama) will be transitioning out as lead. After this change, there will be 11 members of the DAO; members and their compensation are shown in the proposal. One reviewer remains to be added.
Aave governance has several different tracks, but all proposals begin with discussion in the forum, often explicitly labelled an Aave Request for Comment (ARC or ARFC), after which the proposal will move to Snapshot poll and, if successful (and necessary), to an on-chain Aave Improvement Proposal (AIP). Some proposals, such as those involving asset parameter changes, may move directly from discussion to AIP for expediency. This Aave Grants DAO renewal proposal is in the discussion stage; after sufficient feedback and revision it will proceed to the Snapshot stage.
Discussion of the proposal has so far mainly concerned transparency and key performance indicators. AGD documents all expenses publicly (grants, events), and cites “success metrics” from the originating AGD proposal as still pertaining; to the latter AGD would like to add metrics that track the growth of GHO.
The Big Picture
Grant making has been essential to the growth of the Ethereum ecosystem. This began with the Ethereum Foundation itself, but the practice has expanded considerably: many protocols now operate a grants program to fund growth and development beyond what internal teams and/or third-party providers are contracted to provide. Grants programs create the possibility for members of the wider community to contribute in ways that might not be planned or imagined — and thereby provide new enhancements and opportunities for the protocol.
While grants programs can be critical to protocol growth, they can also be complex to operate and require a high degree of transparency so that funding communities can be confident that the protocol’s monies are being spent responsibly. Not all grants programs survive or thrive; Compound’s first attempt, for example, had to be paused until it could be restructured (see our Brief on Compound’s new implementation).
As a protocol Aave refuses to rest on its laurels: it is continually developing new markets and products. Aave v3 Ethereum will be rolled out in the coming months, and GHO is in the works. The Aave DAO has also successfully navigated the challenging, turbulent markets of recent months, with contributors actively debating and reaching consensus on paths forward. In the meantime, third-party providers — whose engagements are reviewed and renewed (or not) by the DAO — have become increasingly central to the efficient and effective operation of the protocol. BGD Labs undertakes much of the development work; Chaos Labs and Gauntlet provide risk management guidance; Llama manages the treasury; and Certora and Sigma Prime assess smart contract security. Several of these providers began their engagements with Aave by receiving grants through Aave Grants DAO. But as these relationships become more professionalized through separate, longer-term contracts, AGD must continue to focus on “growing a thriving ecosystem” in order to attract “a constant influx of talented builders” — who may come from unexpected places.
*Disclosure: In September of 2022 Boardroom received a grant from Aave Grants DAO to provide an “Aave Governance Facilitator” for the Aave DAO. That facilitator is the lead author of this Brief.
We’ll be tracking this proposal activity closely at Boardroom. Follow our newsletter to stay up to date. If you’re a voter in a protocol, make sure to check out Boardroom Portal. {{Brief17//aave}}