Gauntlet has proven that it has significant value to Aave in terms of risk management across various networks.
On this basis, a renewal of the agreement between Aave and Gauntlet would be the best option.
From a proposal standpoint, it seems concise and easy to read. Thank you, team.
Gauntlet has been helpful in thinking about how we engage with different V2 and V3 markets and what may be a good fit. We are supportive and would love to see a continued relationship
Is it worth discussing discontinuing Gauntlet’s support of V2 on Polygon and AVAX? (Without affecting fee)
We as a DAO must do our best to transition users to V3.
While it doesn’t have to happen immediately, a phased-out, limited offering of risk support removes the safety net and acts as an incentive to move to upgraded markets.
Just a thought. Maybe this is a part of a larger, protocol-wide discussion on how to migrate users.
Overall the pricing seems fair, but thought as a DAO we were trying to move away from paying contributors in AAVE and instead be more sustainable with stable reserves. Would Gauntlet be open to take the full payment in USD stables? And question for @llamaxyz how would an all stable offer affect the current DAO cashflow?
Summary
A proposal to renew Gauntlet’s 12-month engagement with Aave on continuous market risk management to maximize capital efficiency while minimizing the risk of insolvency and liquidations to foster long-term sustainable growth. Gauntlet’s current engagement with Aave runs through December 4, 2022.
Background
For the past two years, Gauntlet has collaborated with Aave to maximize the protocol’s capital efficiency given an acceptable level of market risk. Over the past year, we have:
Proposal
Scope
Gauntlet’s Risk Management platform quantifies risk, optimizes risk parameters, runs economic stress tests, and calibrates parameters dynamically. We use agent-based simulation models tuned to actual market data to model tail market events and interactions between different users within DeFi protocols. We run over 300,000 simulations on the Aave protocol each week and utilize trained models for lenders, borrowers, and liquidators based on hourly data with multiple forms of out-of-sample cross validation.
As Aave continues to expand (deployments to new markets, migration to a new protocol version, addition of a stablecoin), the level of risk management needed is at its highest - both in terms of the rigor required, but also the speed of risk monitoring and optimizations. Over the past year, we updated our infrastructure to support all Aave deployments simultaneously with the same rigor used to support the Aave v2 Ethereum market. We also stood up a new engineering team (Platform) to exclusively support deployments and doubled the size of our data science and engineering teams. Our work complements that of BGD, Certora, Llama, and others in a joint effort to protect and grow the Aave protocol.
Roadmap
Continued support for Aave v2 Ethereum
[New] Aave v3 support
[New] New Features
Out of scope
Duration
1-year engagement (Dec 5, 2022 to Dec 5, 2023)
Expectations
Key Performance Indicators
Gauntlet aims to improve the following key metrics without increasing the protocol’s net insolvent value percentage:
Gauntlet aggregates this to a system level by taking a weighted sum of all the assets used as collateral.
Communications
Compensation Model
Gauntlet charges a service fee that seeks to be commensurate with the value we add to protocols and provides strong alignment with the protocol. The fee structure is a fixed annual upfront compensation calculated per the following formula: log(Number of Assets, 10) * Total Borrow * Marginal Base Fee tier bps. Similar to last year, there will be a 25% discount applied for an annual engagement.
Total Borrow is calculated at the start of the engagement (30-day average, rounded down to nearest $1B) and limited to volume that we are providing dynamic risk parameters for at that time (v2 ETH, v3 AVAX, Aave Arc). There is no additional charge for future supported volume (e.g. v3 Optimism, v3 Polygon, v3 Arbitrum, v2 Polygon, v2 AVAX) or new feature development (e.g. interest rate optimization, GHO support). Assets will only be counted once (e.g USDC is counted once and supported across all networks).
If we were to invoice today (currently support 38 unique assets and $2B Total Borrow), it would equate to an annual compensation of ~$2.4M.
Gauntlet has yet to sell any AAVE, but note that we may do so in the future for tax, operational, or other company requirements.
Next Steps
We welcome any feedback on the proposal. Please share any comments or feedback below. We are targeting to submit a Snapshot on Tuesday, November 15th. If this is successful, we will put up an on-chain vote on Tuesday, November 29.
About Gauntlet
Gauntlet is a simulation platform for market risk management and protocol optimization. Our optimization work includes engagements with Compound, Maker, Synthetix, Immutable, BENQI, Venus, Moonwell, Ref Finance, and others.