Aave Governance Process Analysis

    1. Introduction

    Governance is essential to Aave. Like every decentralized protocol, it is how decisions are made to change and improve the protocol for the better. However, to get things right, the governance process has to be robust enough to filter and weed out the chaff, passing only the right and needed improvement. The community members are the proposers and at the same time the arbiters by the virtue of voting power vested in Aave tokens. This write-up will briefly analyze the Aave governance process with more focus on the transitions from one stage to another.

    2. The Governance Process

    The governance improvement process starts off-chain, in the Aave Governance Forum (governance.aave.com), where Aave Request for Comments (ARCs) are created. ARCs once submitted are commented on and discussed, and they must include community polls that members of the community can use to vote. A lot of friction is expected at this stage because according to the Aave docs, "...all questions and comments should be replied to, and taken into consideration, to further improve the ARC." A snapshot vote is also taken to gather a rough consensus to maximize the chances of proposal submission.

    The next step is to move an ARC into an Aave Improvement Proposal (AIP). An AIP is essentially a well written and improved version of an ARC with all feedback taken into consideration. An AIP is assigned a number and must include "all relevant information as well a links to forum discussion and snapshot vote". A written and polished AIP is then submitted to the AIP Github repository for governance. At this point, AIPs are fully fleshed out and remained unchanged throughout the subsequent steps which are mere technical formalities to move AIPs on-chain for a governance vote.

    3. AIP Statistics

    This section presents data on what happens to AIPs on-chain during governance voting. The table below shows proposals submitted and voted on since genesis, the number of votes in favour, the number of votes against, and most importantly if the proposals passed or failed.

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    4. Conclusion

    The changes from an AIP to a proper proposal are quite minimal. Basically, an AIP is just a proposal off-chain. The process required to take an AIP on-chain is merely a technical formality. AIP are usually fully fleshed out and usually remain unchanged throughout the process.

    Here, you can see AIPs grouped according to status; Failed, Created, Queued, and Executed. When AIPs are initially created, they are placed in a pending state where they are voted upon. An AIP's status is updated to Failed when it fails to reach the required quorum, or updated to Queued when the proposal passes. AIPs are queued when an execution delay is set and after the grace period. Out of a total of 40 proposals, 33 has passed, representing an 82.5% success rate.