Consolidate Reserve Factors and Enable Borrowing DPI
01Summary
Re-proposal of expired Proposal 76 that consolidates Aave V1 and V2 reserve factors on mainnet by transferring ~$435K from V1 RF to V2 RF (increasing V2 RF to ~$27.32M), and enables borrowing of DPI token with specified interest rate parameters (0% base, 7% slope 1, 300% slope 2, 45% utilization rate).
- Type
- protocol addition
- Funding
- $~27.32M (consolidated V1 and V2 reserve factors)
Key changes
- Transfer assets from Aave mainnet V1 Reserve Factor (~$435K) to V2 Reserve Factor(medium)
- Redirect all future V1 revenue streams to automatically accrue in V2 Reserve Factor instead of V1(medium)
- Enable borrowing of DPI token with variable interest rate parameters (Base 0%, Slope 1 7%, Slope 2 300%)(medium)
- Upgrade token distributor implementation to send all funds to V2 Reserve Factor(medium)
Notable concerns
- This is a re-proposal of expired Proposal 76 with no changes to the original
- V1 market TVL is declining (~$102.7M remaining)
- DPI borrowing was previously disabled via AIP-44 but is now deemed safe to re-enable
Generated by Kvorum
02Description
Simple Summary
This is a copy of Proposal 76 (IPFS). It expired before execution so we need to re-propose it to the Aave community.
This AIP is the combination of two ARCs presented on the Aave Governance Forum. This proposal performs the initial step of the Llama treasury management strategy and also includes Index Coop’s enable borrowing of DPI proposal.
The Llama proposal entails re-routing the current and future revenue from the mainnet V1 Reserve Factor to the mainnet V2 Reserve Factor. The Index Coop proposal re-enables users to borrow DPI after it was disable by AIP-44.
Abstract
The Llama Community recommends consolidating revenue earned on all Aave markets on mainnet into a single Reserve Factor (RF). This proposal consolidates past and future Aave mainnet V1 market revenue into the mainnet V2 RF. In the future, other aspects of the Llama treasury management proposal will be implemented through separate AIPs.
This proposal is broken into two parts, the second part is to enable borrowing of DPI. The borrowing of DPI was disabled via AIP-44 along with xSUSHI. Shortly after enacting AIP-44, DPI was found to be safe. This proposal is to reinstate DPI as an asset that can be borrowed on the Aave markets.
Motivation
Part A - Consolidate Aave Mainnet V1and V2 Reserve Factors
The legacy V1 market continues to generate mostly flash loan fee revenue and this has slowed down in recent times. There is only ~$102.7M of TVL remaining in the V1 market, and at the rate of which revenue is generated is expected to continue declining as more and more users move to V2 or V3 over time.
This proposal recommends consolidating the Aave V1, V2, and AMM market revenue into a single location before deploying the capital to earn additional yield. The V1 RF holds around ~$435K of assets at the time of writing, whereas the Ethereum V2 + AMM market holds $26.88M of assets. Consolidating the RF balance would increase the mainnet treasury to around $27.32M.
Specification
Part A - Consolidate Aave Mainnet V1 and V2 Reserve Factors
Within this proposal, the assets held with the Aave mainnet V1 RF are to be transferred to the Aave mainnet V2 RF. All future revenue from the V1 deployment will now automatically accrue in the V2 RF upon implementation of this proposal. Post implementation of this proposal, the V1 RF is not expected to accrue any future revenue.
A detailed breakdown of the consolidated constituents can be found on the Aave Treasury Finances by Llama Dune Dashboard.
Part B - Enable Borrowing DPI
The recommendation is to enable borrowing and although there are a number of extrinsic use cases for DPI emerging, starting with a utilisation rate of 45%. For Variable Interest Rate parameters, a Base of 0, Slope 1 of 7% and Slope 2 of 300% was selected which is similar to the constituents within DPI. At this point in time, there is no ask for Stable Interest Rate borrowing.
The details outlining the original specification for listing DPI can be found here, AIP-31. For any additional information see Index Coop’s website: https://www.indexcoop.com/dpi.
Test Cases
The full test of this proposal can be found here: https://github.com/llama-community/refactor-aave-rf/
Implementation
Aave mainnet V1 Reserve Factor: 0xE3d9988F676457123C5fD01297605efdD0Cba1ae
Aave mainnet V2 Reserve Factor: 0x464C71f6c2F760DdA6093dCB91C24c39e5d6e18c
By calling function execute() and function distributeTokens() on the ProposalPayload contract, the token distributor will be upgraded to send all funds to the Aave mainnet V2 Reserve Factor, the AAVE protocol v1's token distributor will be set to Aave mainnet V2 Reserve Factor, DPI borrowing will be enabled and all large balances from the Aave mainnet V1 Reserve Factor will be distributed to Aave mainnet V2 Reserve Factor. The new token distributor implementation was deployed to 0x55c559730cbCA5deB0bf9B85961957FfDf502603.
Target Contracts
ProposalPayload = 0x43D2A74c55eE4DB917251eC934b2fD03E3069bd6
Copyright
Copyright and related rights waived via CC0.
03Mismatch analysis
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Generated by Kvorum
04Actions
- Target
- 0x43d2…9bd6
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
- Target
- 0x43d2…9bd6
- Value
- 0 wei
- Function
- fallback()
- Arguments
{}- Calldata
05Tally
Summed from votes
06Voters
No votes recorded yet.
07Forum
- ARC - Consolidate Aave V1, V2 & AMM Reserve Factors, Purchase CVX and Deploy to Earn Yield ↗discourse · high confidence
Arguments for
- The Aave treasury's reserve factor holdings are largely unproductive and should be consolidated and deployed to earn yield beyond simple aToken returns.— MatthewGraham, Dydymoon
- Acquiring CVX and veCRV gives Aave metagovernance influence over Curve gauge weights, which can boost CRV incentives on Aave-related pools and create a virtuous flywheel for aToken liquidity and TVL.— MatthewGraham, Dydymoon, 0x7751, JeanBrasse
- The initial $2M CVX allocation is too conservative; Aave should buy at least $5M worth of CVX upfront to clear voting hurdles immediately and gain broader governance influence (including over other protocols like Frax).— JeanBrasse, Dydymoon
- An Enzyme vault could solve execution, delegation, and operational concerns by letting Llama manage the portfolio under pre-defined risk controls without telegraphing every move or requiring a governance vote per transaction.— 0x7751
- General enthusiasm for finally putting the treasury to work and expanding this approach to other markets like Polygon and Avalanche.— capncook, oneski22, Donzo
Arguments against
None surfaced.
Unresolved concerns
- Allocating 94.4% of the treasury with over two-thirds concentrated in Convex creates significant smart contract and counter-party risk, and insurance options (e.g., Nexus Mutual) cannot cover deployment at this scale.— fig, eboado, oneski22
- There is no clear governance framework for day-to-day metagovernance voting decisions—whether via full DAO votes, an internal committee, or a delegate like Llama—and what accountability structures (term limits, reporting, compensation) should apply.— fig, 0x7751, oneski22
- Long-term dependency on Convex is risky: as CVX/Convex yields potentially erode over time, unwinding a large, publicly visible position would be slow and market-disruptive, and the treasury could end up holding a large CVX position with only speculative value.— eboado, 0x7751
- The operational implementation plan is complex and lacks detail on which transactions require governance votes, who will execute them, and what security review process will be used for the underlying contracts.— eboado, 0x7751
- Fundamental skepticism about normalizing systematic governance bribing dynamics (à la Convex/Curve wars) as an appropriate strategy for Aave, versus simpler alternatives.— eboado
Notable participants
- MatthewGrahamCo-author of the proposal (Llama Community), laid out the full strategy and responded to technical questions.
- DydymoonCo-author of the proposal who engaged with feedback and agreed to increase the CVX allocation.
- JeanBrasseProposed increasing the CVX purchase to $5M and outlined the strategic rationale for larger governance influence.
- figRaised early concerns about concentration risk, insurance, and governance/voting process for metagovernance assets.
- oneski22Responded to insurance feasibility concerns and suggested a committee-based voting model similar to BadgerDAO/IndexCoop.
- eboadoRaised deeper concerns about long-term Convex dependency, market risk of CVX, and requested implementation/security details.
- 0x7751Representing Avantgarde/Enzyme, proposed a vault-based solution to address delegation, operational, and rebalancing concerns; followed up later without response.
- capncookSuggested extending similar treasury strategies to the Polygon market given multi-chain expansion of Curve/Convex.
- DonzoBrief supportive comment with no substantive argument.
Generated by Kvorum
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