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title: [Proposal] Strategic Partnership with Aave DAO
status: Proposed
author: Llama Community - @MatthewGraham
created: 20-04-2022

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Simple Summary

Aave DAO would like to present the Balancer community the opportunity to swap 200,000 BAL for AAVE. The price is to be determined by the 90-day moving average when an AIP is presented for voting via Aave’s governance process, [1].

Abstract

With a successful Balancer Snapshot vote, an AIP will be presented for the Aave community to vote on. If passed, the contracts will be deployed enabling 200,000 BAL tokens to be deposited and the AAVE held within withdrawn. After the tokens are withdrawn, each community is able to use the newly acquired tokens without restriction.

Aave intends to deposit BAL, with matching ETH, into the 80/20 BAL/ETH pool and then deposit the receipt token into the vested escrow contract, locking them for 1 year. The veBAL voting influence is to be used for directing BAL incentives to liquidity pools that create TVL or provide a backstop for Aave markets, [2].

A separate forum post will emerge requesting the Aave Reserve Factor address be added to the Voting Escrow contract whitelist.

Motivation

Aave and Balance have a long history of working together. The AAVE/ETH (80/20) Balancer V1 pool BPT is accepted within the Aave Safe Module and the newly created Balancer Boosted Pools drives TVL to Aave V2 market, [3]. In time, Aave intends to upgrade the Safety Module from 80/20 AAVE/ETH pool on Balancer V2. There are many more opportunities for both communities to work together and a tokenswap only further strengthens this relationship.

Aave’s veBAL voting influence can be used to vote BAL rewards to Balancer Boosted Pools which utilise Aave markets in the background to create yield for passively held liquidity, [4]. There are likely to be many more Balancer Boosted Pools that utilise aTokens in the future and the veBAL votes can be used to help bootstrap these pools by directing BAL rewards to those pools. Bootstrapping these pools benefits both communities and only strengthens the already strong relationship.

By exchanging AAVE for BAL, the tokenswap reflects the ongoing collaboration and shared vision through governance in each other’s community. Using data from Etherscan, the tokenswap is significant enough for Aave to become just outside of the Top 50 BAL tokens holder and for Balancer to become a Top 80 AAVE holder, [5,6]. Both communities will have influence in the other’s governance process and be aligned through ownership to collaborate in growing the adoption of both protocols.

The initial sizing of 200,000 BAL was reached by attaining input from some members of the Balancer community. The tokenswap is also the same size as the recent Tribe DAO and Balancer DAO token swap, [7]. In addition to the tokenswap outlined here, the Aave community is also considering purchasing an additional 100,000 BAL via a bonding curve on market, [8]. This is a separate proposal and is still in the discussion phase on Aave’s governance forum.

Implementation

The tokenswap is to be performed by both Balancer and Aave by depositing tokens into a contract like how Tribe DAO swapped TRIBE for INDEX, [9].

Upon withdrawing AAVE from the contract, the Balancer community can deploy the holding without restriction from this proposal.

Both organisations can at any moment terminate the agreement through their respective governance systems.

References:

[1] ARC - Strategic Partnership with Balancer Part #1 - General - Aave 2
[2] Introducing veBAL tokenomics 2
[3] Pool management - Balancer 1
[4] Balancer
[5] $15.79 | Balancer (BAL) Token Tracker | Etherscan
[6] $186.13 | Aave Token (AAVE) Token Tracker | Etherscan
[7] FIP-90: Fuse-boosted USD Balancer pool (bb-f-usd) - Proposals - Tribe 1
[8] ARC - Strategic Partnership with Balancer Part #2 - Governance - Aave 2
[9] https://app.aave.com/reserve-overview/?underlyingAsset=0xae7ab96520de3a18e5e111b5eaab095312d7fe84&marketName=proto_mainnet 2

Copyright

Copyright and related rights waived via CC0.