KVORUM
aaveSource: Aave governor v2 · #2

AIP 7: Aavenomics quarterly upgrade

executedJan 9, 2021, 04:07 PM UTCby0A0x0a82…f9f4

01Summary

AISummary by Kvorumclaude-haiku-4-5

AIP-7 upgrades Aave's Safety Incentives by increasing daily AAVE staking rewards from 400 to 550 AAVE per day and formally implementing slashing with a maximum cap of 30% to enforce staker responsibility for protocol protection. The proposal upgrades the reserve contract and introduces a reserve controller under governance control.

Type
protocol addition

Key changes

  • Increase Safety Incentives from 400 AAVE per day to 550 AAVE per day to reflect increased staker risk(high)
  • Formal implementation of slashing mechanism with maximum slashing amount set at 30% of staker deposits(high)
  • Upgrade to Aave reserve contract implementation(high)
  • Introduction of reserve controller with governance-controlled rights to approve and execute asset transfers from Aave Reserve(high)

Notable concerns

  • Slashing enforcement currently requires governance action and manual compensation in phase 0 rather than automated mechanisms
  • Critical protocol failures could result in up to 30% loss of staked deposits
Contracts0x4ab8ba929e4cc780cb82be34eea29a9ea7a580490xa335e2443b59d11337e9005c9af5bc31f80007140x1e506cbb6721b83b1549fa1558332381ffa61a93
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
Read the description ↗

02Description

291 words

aip: 7 title: Aavenomics Quarterly Upgrade status: Proposed author: Marc Zeller (@marczeller) discussions: https://governance.aave.com/t/arc-aavenomics-quarterly-upgrade/1631 created: 2021-01-05 updated: 2021-01-05

AIP rationale

On the 25th of September 2020, with the results of AIP-1, the Aave protocol kickstarted its initial phase of Aavenomics and Safety Incentives with a scheduled distribution of 400 AAVE per day to Safety module stakers.

With the implementation of the Aave Protocol V2 and the soft deadline of first-quarter reached, this proposal will allow an upgrade of the reserve emission model for the Safety module.

This AIP will increase the responsibility of AAVE stakers for their service of protecting the Aave protocol by the formal activation of the slashing.

The slashing officially enforces the currently implicit responsibility and risk of the participation in the stakings modules of Aave. In the worst-case scenario of critical failure, an amount to be decided will be slashed from stakers deposits.

In this phase 0 of the slashing, the auction mechanism will not be automatized yet and if a slash were to happen it would be done through governance and direct compensation.

AIP content in short

  • Increasing the Safety Incentives: As the possibility of slashing will now be formally introduced, staking reward should reflect the risk. Hence we propose to increase the Safety Incentives to 550 AAVE per day
  • Slashing %: The maximum slashing amount is set to 30%

Implementation details

The payload to be executed is available at

https://etherscan.io/address/0x4ab8ba929e4cc780cb82be34eea29a9ea7a58049#code

The payload will upgrade the Aave reserve contract to a new implementation

https://etherscan.io/address/0xa335e2443b59d11337e9005c9af5bc31f8000714#code

And introduce a reserve controller, with the rights of approving transfers/transferring assets out of the Aave Reserve, under control of the Aave governance short executor

https://etherscan.io/address/0x1e506cbb6721b83b1549fa1558332381ffa61a93#code

Copyright

Copyright and related rights waived via CC0.

03Mismatch analysis

AIMismatch analysis by Kvorum

A calldata-vs-description analysis is not generated yet. Review the decoded actions →

04Actions

1 total
#0execute()chain 0x1
Target
0x4ab8…8049
Value
0 wei
Function
execute()
Arguments
{}
Calldata

05Tally

Summed from votes

Voters0
VP participating0
Outcome (current)—
Current support—

06Voters

0 total

No votes recorded yet.

07Forum

AIForum synthesis by Kvorumclaude-haiku-4-5
sentiment · mixedthread · constructive

Arguments for

  • Slashing activation is necessary to enforce staker responsibility and make the Safety Module function as intended insurance against protocol shortfalls.— Zer0dot, MarcZeller
  • Increasing Safety Incentives to 550 AAVE/day reflects the new formal slashing risk that stakers are taking on.— MarcZeller, Dydymoon
  • Adding BPT (80/20 AAVE/ETH) to the Safety Module diversifies it away from pure AAVE exposure and reduces reflexive selling dynamics during a shortfall event.— JonathanErlich, monet-supply, Zer0dot
  • The 80/20 pool ratio strikes a good balance between Safety Module diversification and protecting stakers from impermanent loss while maintaining AAVE exposure.— JonathanErlich, Zer0dot
  • BPT staking with equal 50/50 reward split relative to plain AAVE stakers allows market forces to determine participation levels.— Zer0dot

Arguments against

  • The 50/50 reward split between StkAAVE and BPT is arbitrary and unfair when risk absorption does not match reward distribution proportionally.— depressedape, PatrickB
  • Stakers may be unwilling to accept 30% slashing risk for only 5-6% annual returns compared to more lucrative opportunities on other platforms.— PatrickB
  • The protocol team reaps all transaction fee rewards from the collector contract while stakers bear downside slashing risk in case of protocol failure.— ProofOfLies

Unresolved concerns

  • What is the optimal emission rate: should it be 1100 AAVE/day (550+550) or potentially higher like 2000 AAVE/day?— Dydymoon, Zer0dot
  • Should reward distribution between stakers and LPs be dynamic based on market-implied risk (e.g., COVER price oracle) rather than static 50/50?— srs-parafi, jose_delphi
  • What swap fee should the 80/20 BPT use and should stablecoins be added to the Safety Module mix for additional volatility reduction?— RedEmerald, CryptoRand
  • Should rewards be allocated pro-rata based on actual staked volumes rather than a fixed 50/50 split if AAVE and BPT participation ratios diverge?— depressedape, PatrickB
  • How can the vicious cycle of AAVE price decline, increased slashing needs, and further selling be mitigated?— JonathanErlich, Zer0dot

Notable participants

  • MarcZellerProposer of AIP 7 and originator of the Aavenomics quarterly upgrade framework.
  • Zer0dotEarly vocal supporter emphasizing importance of staker responsibility and governance, questioning long-term incentivization strategy.
  • JonathanErlichProvided in-depth technical analysis on Safety Module resilience, reflexive dynamics, and BPT diversification benefits.
  • depressedapeCritical voice questioning fairness of 50/50 split and advocating for pro-rata reward allocation based on actual staked volumes.
  • srs-parafiProposed dynamic reward distribution mechanism tied to CDS market pricing as alternative to static reward splits.
  • PatrickBRaised concerns about staker compensation adequacy relative to slashing risk and suggested volume-weighted reward allocation.
  • ProofOfLiesExpressed skepticism about asymmetric fee capture by team versus downside risk borne by stakers.
  • DydymoonSupporter advocating for higher emission rates and mentioning ongoing ARC update work on fees and rewards structure.
  • monet-supplyHighlighted liquidity and collateral benefits of adding BPT to the Safety Module.
  • jose_delphiEngaged with dynamic reward proposals and suggested breaking insurance into separate product for demand-side calculation.
Generated by Kvorum
model: claude-haiku-4-5
provider: anthropic
profile: anthropic-fast-v1
prompt: v1.0
generated: 2mo ago
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