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[SPONSORED] Aave Grants Retrospective

The Ghost of Grants

[SPONSORED] Aave Grants Retrospective

Well, hello, anon; great to see you here again for another of my grant program retrospectives! It’s been too long since I wrote one of these, and I hope to get back in the saddle again in pumping out more of this kind of content in the days ahead (famous last words, I’m sure).

This time around, we’ll be looking at Aave, including a brief origin story, the history of their grants, and a deep dive into the current state of their programs.

Without further adieu, LFG!

Origin Story

So what is Aave, and where did the idea for the project initially come from?

At its core, Aave is (according to their docs site):

a decentralized non-custodial liquidity market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers can borrow in an overcollateralized (perpetually) or undercollateralized (one-block liquidity) fashion.

Founded by a Finnish Law Student named Stani Kulechov, Stani came up with the idea for Aave after encountering Ethereum while at university and learning about the potential offered by smart contracts. Stani realized there was an opportunity to provide alternatives to centralized lending, especially as decentralized networks like Ethereum started to mature and take shape.

The project officially launched in January 2017 and was initially called ETHLend. At first, Stani encountered resistance to his idea, with the initial feedback from Reddit forums being there was no need for a service like ETHLend. The fact that Stani received this kind of feedback early on is a testament to how important it is for founders to trust their instincts and not the wisdom of crowds (especially mid-curves on Reddit forums), as many times true potential isn’t always apparent to many early on, that’s the nature of true innovation.

ETHLend underwent an Initial Coin Offering (ICO) in late 2017 (end of November, to be precise) and received ~$17.8 million in funding. While most ICOs were vapor and didn’t stand the test of time, ETHLend had something special and was one of the few projects that made it to the other side of the chasm. I did have fun revisiting the ICO sites that I haven’t looked at since late 2017. That period was Sov’s introduction to crypto and let’s say I wasn’t fortunate enough to find a diamond in the rough like ETHLend.

Following the ICO, ETHLend rebranded to Aave (meaning “ghost” in Finnish) and continued its focus on being the defacto decentralized lending platform. The project has continued to be a success despite the long winter that befell our space in 2018, and in the years since their ICO, Aave has raised over $49 million in private funding rounds to help them grow and sustain.

Over time Aave has continued to innovate on its core offering (such as Flash Loans and the soon-to-be-released $GHO), built a thriving ecosystem of partnerships, and diversified into other areas like Web3 Identity and Social with Lens Protocol.

The Generalist recently wrote an extensive piece with more details of Aave’s history, current state, and roadmap for what is to come. For this piece, I just wanted to give you a bit of the high level on the background of Aave before we jump into the details of their grant programs, so if you’re going to dive into more of the details, please check out their most excellent write up from the thread below.

Now that we have covered Aave’s origin story let’s dive into the history of Aave’s Grant Programs.

Aave Ecosystem Grants

Aave grants started in the same way that Ethereum did: with the founder (in this case, Stani) giving funds to individuals and teams that he felt were growing the protocol and surrounding ecosystem. Information on grantees from those days is not publicly available, but the growth of Aave is probably a testament enough to the success of his early efforts.

Aave decided to formalize the process of grants a bit more when they launched Aave Ecosystem Grants in April 2020. The program was intended to grow support for the protocol by engaging the community to update their governance and focus on developing various applications beyond smart contract development. Aave Ecosystem Grants were run by David Truong, an early member of the Aave Team. David worked to build the structure (seen in the medium posts here and here), reviewed incoming applications and managed the lifecycle of grants from submission to disbursement.

David was kind enough to help me with some background and information for this article. In our discussions on Telegram, he noted:

Grant programs need to make many early bets that may not turn out, but out of a few there will be some good ones. Similar to a VC, but the goal isnt profit maxi, it is network / growth maxi. E.g. Aavegotchi, Push protocol (aka EPNS), DeFi saver, 88mph, GoodGhosting all were awarded grants from the first 2 rounds.

Well done, ser.

The Ecosystem Grants went through two rounds and successfully funded dozens of applications. I created a page on Notion that details the publicly available recipients list if you want to look at them.

Many recognizable projects came through the Ecosystem Grants Program, including DeFi Saver, Rotki, Mero, Jarvis Network, and NFTs with Aavegotchi. The program helped to support many recognizable names in the space as they were just getting started and was eventually sunsetted with the formation of the Aave DAO.

Early Forum Discussions

The first mention of the term “grant” in the Aave Forums was in September 2020; the forum discussion centered on introducing transaction fees to reward $AAVE holders. During this time, the original $LEND (from ETHLend) was being used for governance and dealt with concepts of staking rewards that today are all too familiar across DeFi. In this post, Stani mentions:

One important feature the v2 will have is a Reserve Factor which means that Aave Protocol will be able to collect protocol fees into the Aave Reserve and distribute them accordingly to the Aave tokenholders, builders, grants, liquidity providers and liquidators depending on what the governance wants.

The early forum discussions are a fascinating walk down memory lane with notable personalities like monetsupplyDydymoonMarc Zeller, and Stani discussing concepts that would eventually become mainstays across many projects that dominate the space today.

Around this time, many other early DeFi projects (most notably Uniswap) were contemplating similar grant programs as their treasuries came online. Before this moment, projects like Uniswap, Aave, and others, saw funding through ICOs, venture raises, or from academic institutions or early foundations like Ethereum Foundation (The OG: Original Grantor) for ongoing research and development.

These early discussions and the formation of the Aave DAO were a realization for the team that they needed to take steps to decentralize the process of grants better and think through ways to evolve how community-run grant programs could operate. These drivers were the catalyst for one of the first Sub DAOs created to focus on ecosystem growth through community-focused grants.

Enter Aave Grants DAO (AGD).

Aave Grants DAO

Aave Ecosystem Grants Program was transitioned to the now Aave Grants DAO in May 2021 via AIP-17. What initially started as a two-quarter pilot has become one of the more successful and well-structured grant programs in Web3 today. The mission of the Aave Grants DAO states:

To provide grants to projects, ideas, and events that benefit Aave and its ecosystem.

AGD is effectively a sub-DAO of Aave DAO that focuses on empowering a more comprehensive network of community developers. The program has been renewed from its initial pilot twice now (November 2021 and April 2022) and has continued to scale over time and support Aave and create a rising tide of sorts that has helped foster growth and innovation across all of Web3.

Budgets

Regarding budgets and approach to proposals, AGD took their queues from other programs such as Compound and Uniswap. For example, Aave DAO allocated an initial budget of $2 million and a maximum operating budget of $250k. The operating budget was to be used to pay the lead, reviewers, legal counsel, and other administrative costs related to the setup of AGD.

The program has continued to grow over time regarding budget and supporting resources. For example, the renewal of the initial pilot passed in November 2021 and grew the grant budget to $2 million with an operations budget of $2 million per quarter. Another proposal was passed In April of this year to expand the total funding to $5.8M across two quarters (bear markets are for building, anon.)

Oversight

The initial proposal (written by Aleks Larsen and Shreyas Hariharan) lays out a vision for AGD as a community-led program that appreciates the difficulty of decentralizing grant programs.

One of the more difficult parts of developing this kind of structure lies in the alignment of people to oversee the different functions of the program while still allowing for proper community involvement and overall transparency. For example, AGD formed a grants committee of eight members to address this challenge, including one lead and seven reviewers. This initial team of eight included:

  1. Lead: Shreyas Hariharan
  2. Aleks Larsen
  3. Jose Maria Macedo
  4. Imran Khan
  5. Maggie Love
  6. Corbin Page
  7. Nick Cannon
  8. Calvin Chu

The description for these roles from the initial proposal is as follows:

The job of the lead is to serve as the organizational backbone of the program and ensure that things move smoothly and efficiently. The lead will likely dedicate a significant amount of time to the program.

Reviewers will process applications, ensure that the lead is acting in good faith and is effective in their role, and will operate a 4 of 7 multisig which disburses funds to grantees. The reviewers will also hold the program accountable to its goals and objectives and return any excess funds to the Aave Ecosystem Reserve. Reviewers are likely to dedicate a smaller amount of time to the program.

Both the lead and the reviewers will serve for a period of two quarters. After two quarters, the grants program and the committee member positions will be up for renewal. This will be put up on the governance forum for a discussion and subsequent on-chain vote.

With the subsequent renewals of the program that have happened over time, this team of reviewers has changed its makeup, with some committee members stepping down. The makeup of the grants committee currently consists of the following:

  1. Lead: Shreyas Hariharan
  2. Corbin Page – Paymagic, ex-ConsenSys
  3. Calvin Chu – Impossible Finance
  4. Aleks Larsen – Blockchain Capital
  5. Francis Gowan – Flipside Crypto
  6. Kakashi – Symphony Finance
  7. Lawrence Mosley – Omni Analytics
  8. David Truong
  9. Andrew
  10. Ernesto

In addition to the rotation of committee members, new roles to support the program’s growth. These roles and the current individuals that fill them include:

The compensation for the current team is public knowledge and well-defined. It has changed slightly in terms of hourly rates for some members since the initial proposal and is reasonable compared to similar roles and rates I have seen across other programs. Currently, this compensation structure consists of the following:

  • Lead: $150 an hour with a 30-hour/week cap
  • Review committee: $150 an hour with a 10-hour/week cap
  • Designer: one-off based on specific design engagements
  • Operations lead: $3.5k/month
  • Community manager: $6k/month

Shreyas led the initial recruitment of the team, set up the structure of how grants needed to be reviewed, and improved the speed of responses and quality of reviews. The result was a program that functions smoothly and is on track to create the path to long-term contributions to Aave.

Proposals

AGD broke up the kinds of grants they would fund into two categories: Rapid and Community. The details, as outlined in the initial forum post, describe these categories:

  • Rapid grants: <$100k
    • Simple process to apply for a grant to AGP
    • Grant decision expected within ten days
  • Community grants: $100k-$500k
    • Applicants post a proposal on AAave’sgovernance forum
    • Based on feedback and discussion, the committee can decide to approve these grants

There are allowances for contributors to ask for larger grants over the $500K mark, but these needed to be posted to the Aave governance forum and approved through an on-chain vote of the Aave DAO.

Over time the categories of grants have changed slightly and now consist of four types that are separated based on the size and scope of the grant request. You can find more in-depth details here on their Notion site describing how these are to be submitted, reviewed, and approved.

  • Rapid Grants (<$20k, faster process, smaller grants)
  • Grants ($20K – $100k, quick process, bigger grants)
  • Community Grants (>$100k), just a slightly slower process, substantial grants)
  • Grants Above $500k

AGD accepts applications on a rolling basis, with the grants committee determining how funding is, disbursed (e.g., milestones, upfront, etc.) on a case-by-case basis.

Areas of Focus

As budgets and resources to support the program has grown, so have AGD’s focus areas. Like with the Ecosystem Grant Program before it, AGD started with a primary focus on protocol development to now supports a much broader scope that has allocated funds and resources in support of:

  • Events, Hackathons, and Sponsorships
  • Applications and Integrations
  • User Protection and Protocol Security
  • Community and User Growth
  • Increasing Liquidity
  • Protocol Analytics and Development
  • Oversight and Transparency

In addition to the stated focus areas, AGD’s Notion site has a page that inspires builders and potential applicants. This page is very detailed and a valuable tool to help guide potential applicants on the work that AGD is especially motivated to fund and support. On this page, AGD currently lists its top priorities as follows:

  • Stablecoin Growth: projects and integrations that bring more stablecoin deposits into Aave
  • Governance UI: the development of an Aave-owned front-end for governance and voting
  • Credit Delegations: allows a depositor to deposit funds in the protocol to earn interest and delegate borrowing power to other users

Metrics

The initial proposal outlined quantitative and qualitative metrics that AGD measures over time.

Their team members produce regular reports on progress towards these objectives and general updates on the program (specifically 0xMigi and Bill). They also provide information on the performance and progress made by granted contributors and projects.

0xMigi recently published an update on Aave’s Governance Forum detailing the performance through September, which you can find here. Migi is a total chad and was kind enough to update those numbers for me through the end of October so that I can share them with all of you here.

Funding Per Category

In addition to his role as a reviewer, 0xMigi has been working with Omni Analytics to create automated transparency reporting to provide running monthly updates on the forum along with a progress metrics dashboard. The dashboard is still a work in progress, but thanks to 0xMigi, I was able to get a sneak peek that I have below.

Aave Grants DAO Dashboard

Overall, the team does a great job of keeping a detailed list of the grants given and publishing a regular newsletter that keeps curious minds abreast of all the latest happenings with AGD and the more comprehensive Aave Ecosystem.

Aave has built an awesome developer community. Even though the AGD team is somewhat lean, they have had an outsized impact on their contributions to Aave and the broader ecosystem.

How to Apply

Applying is a straightforward process. You can head to this page on their Notion and complete a simple form that requires standard details requested by Web3 grant programs, including a project description, goals, milestones, funding request, and a budget breakdown.

In addition to their standard application process, the team at AGD is also partnering with Questbook to pilot the use of their product for community grants. Questbook has a platform that allows for the management of Web3 grants across their lifecycle and is provided a grant in a recent round from AGD. You can head over to the application on Questbook if you want to check out that route.

Once your form is submitted, the typical turnaround time to hear back is within a week or two, which is relatively fast, considering the volume of applications. The team reviews each application and will want to set up a meeting or interview to understand more about your proposal if they consider moving forward. If your application is declined, you will receive an email that may or may not describe why AGD denied the application.

In addition to the form, AGD has a dedicated Telegram Channel where applicants can pose questions to the team and get feedback regarding submitted applications or general questions regarding the process.

Ecosystem Grant Programs

In addition to the AGD, which serves as the primary Grants DAO for Aave, I wanted to include some details on the Aave Team’s Web3 answer to social media, Lens Protocol, and their grant program.

Lens Protocol

Lens Protocol is a composable and decentralized social graph built on Polygon. Lens isn’t technically part of Aave Grants, BUT it was created by the same development team (and it’s awesome), so I thought I might add it here for the culture.

The protocol is user-owned and open and allows any application to build on top of it. Lens Protocol is Web3 Native and has features and functionality that enable creators to own their content wherever they go.

Lens Protocol is from the same development team that brought us Aave Protocol. Initially teased by Stani at LisCon in late 2021, there was quite a bit of buzz around decentralized alternatives to today’s social media giants for apparent reasons.

An open letter started circulating in January of 2022 describing the project, and Lens Protocol launched shortly after. In the Mirror Post announcing Lens Protocol, the team details a few topics, including why they built it, what it is, and how the various functions work.

Since its launch, the project has been a smashing success, with many different projects building interesting applications on top of it. For example, 0xJuanicito curates a list that you can check out detailing projects, resources, libraries, and tools for Lens.

Lens’ grant program focuses on supporting open-source projects that generate public goods for the community. The program launched parallel to the protocol in February of this year and has since granted multiple recipients (you can read the threads here and here announcing recent grantees).

They have many categories under which they accept grants, and the application process is simple. You can check out their Notion Site to apply or for more details.

Closing

That’s all for now, anon. 

I hope this piece was informative and helped provide some perspective on Aave and its associated grant programs. Big thanks to Aave Grants DAO for funding this piece and sponsoring my Crypto Grant Wire series.

If you like my work, follow me on Twitter and check out my blog, Sovereign Signal, if you found this by some other means.

I also curate Sov’s Compendium, a collection of curated information sauces, research, and valuable tools that might help your journey toward sovereignty.

Peace,

Sov

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