Strategic Partnership Analysis: Aave x Curve Finance
A high-level overview of integration opportunities between Aave and Curve Finance, exploring the utilization of $CVX to grow TVL across various Aave v3 Markets.
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A high-level overview of integration opportunities between Aave and Curve Finance, exploring the utilization of $CVX to grow TVL across various Aave v3 Markets.
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This analysis explores opportunities to leverage Aave's $CVX holdings to incentivize liquidity on Optimism, as part of a sustanable multichain TVL strategy.
A collaboration between Aave and Curve would lay groundwork for aToken utilization across many chains to which Aave v3 will be deploying. There has been talk of acquiring 70,000 $CVX within the Aave governance forums lately. The accrual of 70,000 $CVX gives Aave a significant voice in Convex's governance (proposal power), thus a major voice in the Curve wars. Aave has the opportunity to incentivize aTokens across multiple chains by way of $CRV emissions for aPools. This will increase both aToken utility across various chains, as well as increase Aave v3 TVL across various chains. Once Aave acquires the aforementioned amount of $CVX, Aave can then create a gauge within Curve for aToken pools on chains that are either A) underperforming expectations in terms of TVL, or B) Aave v3 new launches. After creating the gauge, Aave's Convex holdings could then be used to vote on directing $CRV emissions to aPools on chains that Aave would like to grow their v3 markets on. In short, the Convex purchased can be utilized in a way that incentivizes deposits of aTokens within Curve, on specific chains that benefit Aave.
As seen above, Polygon is claiming around 46% of Aave v3 TVL. While these times are unique in the fact that most chains (excluding Harmony and Avalanche) do not have rewards incentivizing deposits.
For this example, let's use Optimism as it is currently underperforming relative to other Aave v3 Markets.
Launch aPool on Curve (Optimism), comprised of (for example) aUSDC, aDAI, aUSDT.
Deploy Gauge for aPool on Optimism (Must be done on Ethereum Mainnet).
Propose the addition of Optimism aToken pool gauge in Convex governance.
Vote in Convex's gauge proposals to direct $CRV emissions to the aPool on Optimism.
This strategy can be repeated for any new v3 (or underperforming) markets that Curve is deployed on.
By utilizing (future) Aave $CVX holdings, Aave can direct $CRV emissions to chains as needed. In theory, these emissions will incentivize new and existing users to supply their tokens and receive aTokens on the Aave v3 markets that are in need of liquidity (v3 portals will make the transition relatively seamless). Additionally, this will attract new users across these chains to the Aave platform in order to earn yield within Curve. This strategy also increases overall utility of the aTokens.
This strategy adds minimal risk to the existing practices of Aave. Instead of using the $CVX voting power to direct $CRV emissions on Ethereum, $CVX holdings would strategically be used to grow Aave v3 TVL on new chains.
Note: There are still remaining risks involved with Convex (centralization of Curve voting power).
An ARC will need to be submitted to the Aave community in order to gather relevant feedback. Additionally, a Snapshot would be useful in order to gauge community sentiment regarding this strategy.
There would likely need to be bi-weekly or monthly adjustments to the gauge voting strategy on Convex in order to reflect Aave's current needs, and to maintain effectiveness. Governance forum discussions and Snapshot votes would suffice for this as it has no changes taking place directly on the Aave protocol.
Liquidity providers claim CRV rewards on Fantom and make a request to the Fantom Child Liquidity Gauge contract.
Child Liquidity Gauge contract calculates the user’s Power value and liquidity pool on Fantom, and then submits cross-chain requests by calling the anyCall API on Fantom.
anyCall sends “messages” to the API contract deployed on Ethereum, by which to call the Root Liquidity Gauge contract deployed on Ethereum to deliver the requests and related Power data.
The Root Liquidity Gauge contract receives the ‘message’ and calculates the rewards. Meanwhile, the Root Liquidity Gauge calls the CRV mint contract to mint CRV.
Minted CRV cross back to Fantom and transfer to the Child Liquidity Gauge contract.
The Child Liquidity Gauge contract sends rewards to users.quq
Additional information on anyCall here
