Ecosystem Overview

The above diagram describes the goal to create a flexible, secure and sustainable network of markets regulated by both protocol-wide and market-specific policies, that are defined and validated through a governance process that empowers token holders with the right to decide the path forward.


The Aave Protocol aims to enable global permissionless tokenized assets money markets. This mission was initiated with the release the protocol and pursued with the recent launch of alternative markets. The next steps towards decentralization entail governance and the launch of Aavenomics. The following diagram highlights Aave’s execution plan and the current position in the development cycle:


The Genesis Governance

The first step of the Genesis Governance is the initial bootstrapping of the Aave ecosystem, comprising the AAVE token contract, the migration contract from the LEND token to the AAVE token and a governance contract designed to have the AAVE token as the only voting asset.

The objective of the Genesis Governance is to enable this transition by submitting one or multiple proposals in a governance contract designed to have the LEND token as the voting asset. During this transitional period, the bootstrapping proposals will be submitted by the Genesis Team after being approved by the community via the Aave Improvement Proposal procedure defined in the AIP framework.

The following diagram presents the flow for the approval and execution of proposals during the Genesis Governance phase:

Genesis Governance

The Aave Genesis governance architecture's smart contracts components are:

  • AaveProtoGovernance: A core component of governance which stores the state related to each submitted proposal, allows voting by the LEND token holders and permits the execution of approved proposals. This contract will have the ownerships needed to execute proposals containing all the bootstrapping actions of the Aave ecosystem.

  • AssetVotingWeightProvider: Defines weights a voter can vote on proposals. Only LEND tokens will be allowed to vote, with a weight of 1 (1 token = 1 vote).

Compared to other governance systems, the Aave governance allows users to vote using cold wallets. Users can simply sign a message and forward the vote using a different wallet to help holders of considerable amounts of funds to vote without needing to move their tokens from cold storage. The only requirement is to keep the LEND funds in the wallet from which the message was signed during the whole duration of the proposal. This has the potential to be abused, as it does not require tokens to be locked (users voting multiple time with the same tokens using different wallets). To avoid this, the governance implements a vote challenging procedure. The validation period V can be activated when:

  • The minimum voting duration is reached, and a voter crosses the quorum.

  • The minimum duration is not yet reached, but the vote is already past the quorum. In this case the challenging period needs to be triggered manually.

During the validation, a challenge function will be executed for each address that doesn’t hold the tokens with which the vote has been performed. This challenge action will cancel the voting power of the challenged wallet and, if the proposal threshold is crossed down because of this, the voting period will be reopened. This process will be repeated for a certain number of iterations, defined in each proposal (so that more urgent proposals can have faster execution times). If the number of iterations defined by the proposal is reached, the result will be taken without a quorum.

Governance Process

The Governance Process is fuelled by governance forums at and ratified through on-chain Aave Improvement Proposals (AIPs) using AAVE. The following diagram explains how the governance process will flow, from the inception and definition of the concept to the actual implementation:

Governance Process