The discussion was initiated by Dvrij who raised concerns about the status of Aave Arc, a product launched with Fireblocks and 30 trading firms in January 2022. He observed a slow but steady increase in Total Value Locked (TVL) from approximately $6M to nearly $8M, before a sudden drop that seemed to empty Arc. He speculated that only a handful of firms might have been using Arc and stopped in November 2021, and sought clarification from the Aave BD team about their future plans for Arc [Dvrij, 1]. This sentiment was echoed by Tor_GAINS [Tor_GAINS, 2], and Dvrij further suggested that this could be a bearish sign for KYC-Fi [Dvrij, 3].

Fig responded by acknowledging the initial enthusiasm around Arc, which was aimed at institutions and larger borrowers. He noted a few proposals related to Arc and clarified that the shift from ARC to ARFC in Governance was intended to reduce confusion. He also highlighted the challenges faced by Arc, which are common to many crypto products, including raised rates, a shift in focus for curious institutions, and a loss of faith due to exploits and hacks. He pointed out that other platforms like Coinbase have developed cleaner on-ramps for institutions. He suggested that if Aave wants to grow this market, it needs to reinvest in business development, although the community has shown a preference for growing other Aave products over Arc [Fig, 4].

MarcZeller then provided an update that Arc would return as special purpose (OCA) GHO facilitators. He identified the main bottleneck on ARC as the supply side, not the demand side. He mentioned that with GHO, the protocol is the "LP", so efficiency is unmatched. He also mentioned that the ACI is already working with several Off-Chain collaterals (OCA) entities and will create proposals for the DAO when GHO has matured enough [MarcZeller, 6].

In conclusion, while there are concerns about the performance and future of Aave Arc, there are also plans for its evolution and improvement. The community's preference for other Aave products over Arc suggests a need for a strategic reassessment of Arc's role and potential. The return of Arc as special purpose (OCA) GHO facilitators, as mentioned by MarcZeller, indicates a potential new direction for Arc, which could address some of the concerns raised in the discussion.