Aave Improvement Proposals (AIPs) describe standards for the Aave Protocol, including core protocol specifications, client APIs, and contract standards.

AIP 5: Adding CRV on AAVE

Author: Charlie , Julien (@bneiluj)Status: Implemented - Discussions- RawCreated: December 14, 2020 (Updated: December 14, 2020)

AIP rationale

Curve is an exchange liquidity pool on Ethereum designed for extremely efficient stablecoin trading. It is the second biggest DEX on Ethereum and the third biggest protocol by TVL.

References

Paragraph Summary

Curve is an exchange liquidity pool on Ethereum designed for extremely efficient stablecoin trading. It is the second biggest DEX on Ethereum and the third biggest protocol by TVL. The CRV token is a governance token which also allows liquidity providers to boost their rewards on the platform as well as receive a share of trading fees on the Curve platform. Curve has recently reached over $10B in cumulative volume. Users who vote lock their tokens (CRV => veCRV) receive a share of trading fees on the platform as well as a boost on their provided liquidity.

Motivation

Short description of the proposed technical solution

Specifications

  1. What is the link between the author of the AIP and the Asset?

Team member/llama master

  1. Provide a brief high-level overview of the project and the collateral token See Summary
  2. Explain positioning of token in the AAVE ecosystem: which market?

The asset will be listed in the current AAVE V2 market.

  1. Provide a brief history of the project and how it overcame stressed conditions

Curve was created in early 2020 and was the second protocol to reach $1B in TVL. It is currently the second biggest DEX on Ethereum.

  1. How is the asset currently used?

Lending/governance/profit sharing

  1. Market data (Market Cap, 24h Volume, Volatility, Exchanges, Maturity)

https://www.coingecko.com/en/coins/curve-dao-token#markets

  1. Social channels data (Size of communities, activity on Github)

Links above

  1. Risk Assessment and Parameter suggestions

Here is an analysis based on Aave’s Asset Risk Framework 3 to quantify CRV’s risks and the resulting model parameters suggestions

CRV’s Overall Risk is B-

The table below shows the key metrics used for the analysis as well as the risk scores using data from CoinGecko as of 15/12/2020 CRV is the governance token of the Curve DAO behind the Curve Stablecoin Exchange the third biggest DEX on Ethereum with $1B of TVL. Curve offers an optimised model for stablecoin trading and revenue sharing incentives with fees from the >$10B in cumulative trading volume

CRV Smart Contract Risk: B-

CRV token was introduced to Curve in August 2020 through liquidity mining. The code has 3 audits from ToB, Quantstamp and MixBytes. It is central in the DAO operations enabling stakers to vote and boost their yields with the locking of CRV. This model has generated half a billion transactions in half a year, with around 15,000 holders

CRV Counterparty Risk: B

The Curve DAO operates as a fully decentralised organisation with community proposals and votes. The ecosystem is funded by fees of the Curve Exchange generated by the $40m of daily volume

CRV Market Risk: C

Curve is one of the leading DeFi projects. The token is available on top exchanges with nearly $100m market capitalisation and nearly as much average daily volume though a large share of CRV’s supply is locked. CRV experienced volatility in the last month with the rest of the market having yet to recover CRV’s risk profile is close to YFI’s leading to the same model parameters

Risk Parameters

  • LTV 40%
  • Liquidation Threshold 55%
  • Liquidation Bonus 15%
  • Reserve Factor 20%

Variable Interest Rate Model

CRV fits the profile of a collateral asset, with the need for a conservative borrow rate model with a low optimal utilisation to protect collateral liquidity

  • UOptimal 45%
  • R_0 0%
  • R_s1 7%
  • R_s2 300%

Code

The code is part of the standard Aave protocol deployment (the AToken, Debt tokens and interest rate strategy) therefore no audits are needed. The code can be found here https://github.com/aave/protocol-v2/tree/master/contracts/protocol/tokenization

Test Cases

Being a standard ERC20, the Aave protocol test cases already cover everything needed to support CRV.

Security Considerations

The CRV token doesn’t have any specific behavior (eg. rebasing, balance increasing) and doesn’t offer meta governance functionalities since it requires locking to participate in the governance. Therefore, the standard AToken contract and corresponding debt tokens, already used for the majority of assets listed in Aave, can be also used for CRV. No auditing of the code is required.

Aave Improvement Proposals (AIPs) describe standards for the Aave Protocol, including core protocol specifications, client APIs, and contract standards.

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