Aave DAO votes in favor of acquiring CRV tokens with USDT
The DAO will use $2 million worth of USDT to secure 5 million CRV tokens
WindAwake/Shutterstock modified by Blockworks
Led by Marc Zeller of the Aave Chan Initiative, Aave DAO’s community governance process has approved a proposal to strategically acquire CRV tokens using USDT from Aave DAO’s treasury.
This comes in the wake of a recent exploit, when Curve lost over $70 million due to a bug in the programming language Vyper. The aftermath saw CRV, Curve’s native token, plunge to $0.59 at the time of writing; a significant drop from its previous position of approximately $0.73 pre-exploit.
According to Zeller, the proposed acquisition, which involves procuring five million CRV tokens in exchange for two million USDT, would help indicate support for the wider DeFi ecosystem.
He believes it also presents an opportunity to bolster secondary liquidity for Aave’s stablecoin, GHO.
“These tokens can be mobilized to incentivize GHO liquidity via locking them to gather Curve voting power and support a GHO-specific Gauge,” Zeller wrote in a proposal. “The treasury balance and the predicted lower costs for service providers for the 2023-2024 budget would allow this strategic acquisition while maintaining a conservative stance with DAO treasury holdings.”
One concern, voiced by an Aave community member known as MrKris, was that acquiring more CRV tokens would amplify Aave’s exposure to CRV-related risks.
Curve’s founder, Michael Egorov, had taken out a significant loan of an estimated $70 million in USDT using CRV as collateral on Aave v2. This meant that if the price of CRV dropped below 65% to roughly $0.32, Aave could potentially be left with bad debt. Egorov ultimately undertook a process to rebalance and pay down some of that debt.
Despite these concerns, the proposal has passed, with almost 58% of voters choosing to go ahead with the acquisition of CRV, and 42% voting against it.
Get the news in your inbox. Explore Blockworks newsletters:
- Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
- Empire: Start your morning with the top news and analysis to inform your day in crypto.
- Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
- 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
- Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
- The Drop: For crypto collectors and traders, covering apps, games, memes and more.
- Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.
