Staked ATokens, A New Aave Primitive Exploring Vote-Escrow Economies

Summary

This proposal seeks community approval for the DAO to implement a new aToken primitive called “Staked aTokens” that would allow the Aave Protocol to participate in Vote-Escrowed economies. This new primitive would allow for the use of Liquidity Provider (“LP”) tokens from ve-based protocols, like Balancer or Curve, as collateral while participating in those protocols’ ecosystems. LP tokens are locked at their corresponding vaults (e.g., gauges) producing increased rewards that are distributed to suppliers to the Aave Protocol.

Under this proposal, users could use their LP positions as collateral while earning a variety of rewards with a maximized rate (also known as “boost” and referred to as increased rewards throughout this proposal). This brings a new wave of strategies like leveraged LP positions which can increase user rewards greater than the 2.5x limit and tap into the stability of listed stablecoins.

If approved, the Aave DAO Treasury could generate revenue from staking rewards. Further, this would also allow the Aave DAO Treasury to participate in the veToken economy and attract additional users.

The purpose of this Snapshot is to garner community approval on the above recommended implementation and to signal approval for Balancer Pool Token (“BPT”) assets being the first accepted LP positions.

Conclusion

Ultimately, this could have a wide array of benefits for the Aave DAO and users of the Aave Protocol. For example, the Aave DAO could gain a new source of revenue whilst becoming part of the governance of Balancer, a closely aligned protocol. At the same time, users of the Aave Protocol would be able to use LP tokens as collateral and earn increased rewards.

Next Steps

If approval is granted by the DAO, the following steps will be taken to implement necessary changes:

• Proposal in BalancerDAO to present the built implementation and ask to be allowlisted.
• A Snapshot for the community to decide where the newly accepted collateral type would be listed.
• Proposal in AaveDAO for listing an initial set of BPT assets based on community discussion.
• Proposal in AaveDAO to deploy treasury BAL and ETH and provide an initial reward boost to Aave BPT suppliers.