Aave DAO Governance Proposal: Staking Unproductive ETH Balance for Higher Yield

Summary

A proposal is underway in the Aave DAO governance forum to move $3 million in ETH from the treasury into wrapped staked ETH (wstETH) and rocket pool ETH (rETH). The proposal suggests that converting 1,600 unstaked ETH to liquid staking derivatives will earn higher yields for the protocol.

• The proposal has received 252,152 votes in favor, arguing that converting 1,600 ETH to liquid staking derivatives will earn 3.8% yield by staking wstETH and 3.13% by staking rETH.
• The proposal notes that wstETH and rETH, both liquid staking derivatives, allow for lock-up of tokens without losing liquidity access.

Rationale for the Proposal

The proposal argues that earning higher yields through liquid staking will benefit the Aave DAO in several ways:

• Currently, staking awETH on the DeFi platform’s version 2 (V2) or V3 platform generates a yield of only 1.69%. Staking wstETH and rETH would earn a higher yield of 3.8% and 3.13%, respectively.
• The proposal explains that the DAO currently holds awETH and ETH in the Collector Contract, earning 1.69%. By converting these tokens to wstETH and rETH, the DAO can participate in staking and earn the higher yields mentioned above.
• The proposal also claims that liquid staking derivatives like wstETH and rETH hold collateral (staked crypto tokens) and offer a derivative of that token. This enables stakers to stake their tokens without losing liquidity access.

Current Voting Outcomes

<p.At the time of writing, 252,152 votes support the proposal out of the required 320,000.

Notably, the majority of the votes (236,000) were cast by a single wallet with the ENS “aavechan.eth”. The Aave Protocol’s token has seen a 2% depreciation in the last 24 hours and can be exchanged for around $75.

The DAO has seen another vote, this time about deploying V3 of the service on both the Ethereum layer 2 network and BNB Chain.

Conclusion

Aave DAO members are reviewing a proposal to convert 1,600 unstaked ETH from its treasury into wstETH and rETH. The proposal aims to raise the yield earned by the protocol through stakeholding, by converting awETH and ETH in the Collector Contract and participating in staking. The plan involves staking wstETH and rETH, which would likely generate 3.8% yield and 3.13% yield for the protocol, respectively. The proposals are under review, and participants are weighing the benefits and potential issues of this decision.

Frequently Asked Questions

1. What is the purpose of the proposal to convert unstaked ETH in the Aave DAO treasury into wstETH and rETH?
The proposal aims to increase the yield of staked tokens for the Aave protocol by converting awETH and ETH in the Collector Contract to wstETH and rETH, which would facilitate staking and generate higher yields, such as 3.8% from wstETH and 3.13% from rETH.

2. What are the potential benefits of this plan?
By staking wstETH and rETH, the DAO participants can generate higher yields compared to stakeholding awETH and ETH individually. This plan also creates a means for stakers to join staking activities without losing liquidity access as the tokens remain liquid.

3. How many votes have been cast to date?
At the time of writing, approximately 252,152 votes support this proposal, but it still requires further votes to pass the 320,000 threshold.