Aave DAO Greenlights ‘aCRV OTC’ Proposal For CRV Token Acquisition

An update on the Aave governance forum suggests that the community has passed the “aCRV OTC” proposal, which proposes the strategic purchase of CRV tokens through the utilization of USDT from the collector contract, Aave DAO treasury.

Moreover, the governance proposal aims to secure 5 million Curve DAO Tokens (CRV). The community has displayed evident divergence of opinion regarding this proposal, as over 42.19% of the votes oppose the CRV acquisition arrangement. Conversely, almost 58% of the community has cast their vote in favor of advancing with the deal, which is anticipated to be put into effect within the upcoming 24 hours.

Aave DAO’s move is an effort to capture a significant portion of Curve Finance’s liquidity by prioritizing pools with higher CRV rewards. The distribution of CRV rewards among these pools is guided by the dominance of protocols holding substantial veCRV token amounts. On the forum, Aave noted:

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.

Curve Finance founder Michael Egorov has utilized more than 30% of CRV’s overall market capitalization as security to acquire loans amounting to approximately $60 million from Aave v2.

However, the recent hack on Curve, which transpired on July 30, has had a negative impact on the token’s value. Consequently, Egorov’s position is now at risk of being liquidated due to this decline in token price.

The recent exploit of Curve Finance

In addition, Aave is also aiming to promote liquidity for its native stablecoin GHO. To achieve this, the protocol intends to lock CRV tokens to amass Curve voting influence and establish a dedicated gauge for GHO, ultimately enhancing secondary liquidity for GHO.

Meanwhile, the Aave community presently considers two proposals aimed at minimizing CRV exposure. The initial proposal targets a 6% reduction in the liquidation threshold for CRV on Aave Ethereum V2 and is on track for approval, garnering unanimous support in the votes. The second proposal aims to suspend borrowing of CRV on Ethereum and Polygon V3, encountering no opposition thus far and scheduled for implementation after August 13, 2023.