Aave - Communication Breakdown

Governance is a theater.

In the dark night of the bear market, where projects and portfolios were mauled or leaving the market altogether, Aave wasn’t haunted and rolled on with the show.

Moving full speed ahead, but not exactly in a straight line, Aave governance has not always gone as planned.

Recent exposure to the risk of cascading liquidations on DeFi protocols resulting from the Curve Finance pool exploit had some spooked.

During a recent Immunefi bug bounty program some bugs were found.

Inconsistent borrow rate and validation, as well as price manipulation. Good thing for Aave it was the white hats.

Add the ambitious task of introducing a multi-chain governance following a v3 upgrade. Governance was heating up in the community.

Aave also launched its own stable coin GHO in the summer of 2023. It proved not to be such a stable ride, as it could not maintain its peg. They launched rescue efforts through governance.

Did the governance process go as smoothly as planned or did it turn into a haunting episode of governance theater?

Since its grand unveiling, GHO's been on a wild ride.

Lacking a redemption mechanism that lets token holders swap it for a buck didn’t help matters.

Now, enter stage left, the GHO Liquidity Committee (GLC). Tasked to try and prevent GHO's peg from wobbling more than a drunk on a tightrope.

There happened to be a so-called liquidity expert among the committee, who complained there weren’t enough fellow experts in the committee.

What could go wrong?

This so-called liquidity expert would declare himself "temporary and benevolent leader" soon after through a committee vote. So the liquidity would be managed per the governance process, right?

Not exactly, as the committee tore up the script and performed an improv act instead. Transferring the wrong tokens, going against the governance process.

4 out of 5 signers are needed to transfer funds to the Gnosis safe, voted upon by the governance process. They were supposed to mint and stake sdCRV to the safe.

Instead they ended up sending cvxCRV. Going off script from the governance vote, disrespecting not only the process, but Aave and their community as well.

Transfer 1 (1.05M cvxCRV)

Transfer 2 (1.05M cvxCRV)

Just over a week later. The over-theatrical committee leader resigned and went off on a rant on X and his blog.

Even taking jabs at sdCRV, the same token the GLC was supposed to transfer to the Gnosis Safe. Not suspicious, is it?

Not only did Token Brice complain about the liquidity decisions of the GLC, he complained about the governance process. Mentioning conversations were happening backstage and not in front of the community.

Highlighting inheriting “bad governance”, even though a prime example of bad governance happened under his watch. No contradiction to see here.

Decisions and discussions had to be made behind the scenes by the anti-hero of the story. Because it takes 4 singers to send transactions to the safe. He couldn’t have acted alone could he?

Did Brice resign in a panic, before being outed for his malicious behavior or was he GHOsting the situation before getting fired?

Only if they followed a transparent process of proper governance. Instead of performing governance theater on Social Media, maybe this could have gone better.

Aave must be pretty heated about the situation. Adding fuel to the fire, risk manager Gauntlet recently terminated their relationship with Aave.

John Morrow, co-founder of Gauntlet, stated that his team encountered challenges in navigating the "inconsistent guidelines and unwritten objectives" set by Aave's "largest stakeholders.

Could this situation have been prevented? Pulling a coup during the governance process is as anti-governance as it gets.

The point of decentralization is to take away the power from the hands of the few. Because as history has taught us, it rarely benefits the whole.

We’re trying to break away from the broken old system, by creating a new one. Only to repeat some of the same mistakes and behavior that broke the old system.

Crypto is still a little wild wild west, the space is young and definitely has some growing up to do. Aave is not the only one who has bugs to work out.

With inevitable Mainstream adoption, we need to get ready for the big time instead of acting like a circus sideshow.

Is it time to discover other forms of governance? Even consider the no-governance model of Liquity?

In the grand theater of DeFi governance, the GHO-GLC saga serves as a stark reminder of the complexities and challenges that lie at the heart of decentralized governance.

The answer lies not in the script but in the actors.

It's time for the DeFi community to take a hard look at itself, to question the motives and methods of its governance, and to strive for a future where the stage is not just a theater but a platform for progress and innovation.

But aren't we also all here for the drama?

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