Aave DAO Treasury Diversification Discussion

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governance.aave.com

TL;DR:

The Aave DAO is considering a proposal to diversify its treasury from AAVE tokens into stable coins and ETH, using an over-the-counter style token sale to the community. The proposal, aimed at providing financial stability, has sparked debate over the method of conversion, the need for token lock periods, and whether the DAO should sell tokens at a discount or to the highest bidder.

The discussion initiated by Iceman revolves around the proposal for the Aave DAO to diversify a portion of its treasury from governance AAVE tokens into stable coins and ETH. The aim is to create a treasury management working group to lead ongoing diversification and treasury management goals. The proposal also includes a method for converting tokens to stable coins using an over the counter style token sale offering to the Aave community and public. The sale would incorporate a discount plus a time-lock for the purchased tokens. The proposal includes three separate tranches of sales with different amounts of tokens, payment currencies, prices per token, discounts, and lock periods.

The proposal is justified by the need to provide financial stability for the DAO as it expands its involvement with the larger DeFi and web3 ecosystem. By diversifying a portion of the Aave treasury into stable coins, the treasury can generate stable coin yield on those assets using its own protocols, and fund grants and the DAO indefinitely. However, the proposal has been met with mixed reactions. Pakim249 disagreed with the idea of selling tokens OTC at a discount, arguing that it's disadvantageous to the treasury's interest and the timelock simply locks the capital. They also questioned the need for lock periods for AAVE, suggesting that AAVE should sell their tokens on the open market at the highest bidder's price. RyanRam agreed with Pakim249 but suggested that selling time-locked stkAave OTC with a discount could be interesting.

Iceman responded to the feedback, explaining their assumption that the AAVE DAO requires capital to operate and that every transaction is an immediate sale of AAVE on the market. They also raised the question of whether AAVE actually needs funds to operate or if it's well-funded in USD or ETH. They suggested that it might be responsible to divest some of the AAVE tokens in the treasury to stable coins to ensure funding for several years. Eboado clarified that the AAVE DAO treasury is not meant for operational expenses but for distributing governance power. They mention that the ecosystem reserves, which are used for operational costs, are currently healthy at around $45 million. They disagree with swapping AAVE tokens for operational costs. MarcZeller is against selling AAVE tokens from the Ecosystem Reserve.

In conclusion, the discussion has brought to light the need for diversification and conversion of tokens to stable coins due to market volatility. However, the method of conversion and the source of the tokens for conversion remain contentious issues. The Grants have not yet been funded and are scheduled for on-chain voting soon. The outcome of this vote will likely influence the next steps for the Aave DAO treasury management.

Posted 2 years ago

Last reply 2 years ago

Summary updated 2 months ago

Last updated 08/12 04:39