Aave DAO, the governance arm of the Aave decentralized finance (DeFi) protocol, has swapped $1.6 million worth of its AAVE tokens with $1.13 million in Balancer (BAL) tokens in an exchange for each project’s treasury coin.
Aave/Balancer Treasury Swap Proposal
The treasury swap followed an on-chain vote on the Aave DAO governance community based on a proposal initiated by LlamaPay developer Matthew Graham in March. The proposal, which was subsequently amended, called for Aave to swap 16,908 AAVE tokens ($1.63 million) for 200,000 BAL ($1.13 million) coins.
According to details from the on-chain voting page, the vote passed unanimously with nearly 400,000 in favor of the proposal. The process ended on July 19.
With the vote concluded, the swap occurred via a smart contract that used a flat rate of 1 AAVE for 11.829 BAL tokens. Using this rate helps with the wide difference of over $500,000 in the token swap, according to the value of each token.
Reasons for the Swap
Detailing the reasons for the treasury swap, the proposal stated that the token exchange will enable Aave to obtain BAL tokens to provide liquidity for its 80/20 BAL:ETH pool on Balancer. Aave will lock its liquidity position and receive vested BAL (veBAL) tokens. The vesting period will be for one year.
The proposal states that Aave will use the veBAL voting power to vote for additional rewards for pools that support AAVE token pairs. This will, in turn, increase liquidity and revenue for Aave.
The swap will also make both protocols become major holders of each other’s tokens.
“The token exchange, plus additional acquisition, is significant enough for Aave to become a Top 30 holder of BAL tokens, based on etherscan BAL holder rankings. Balancer will become a Top 80 AAVE holder.”
According to the proposal, the treasury swap will enable Aave and Balancer to play a more prominent role in the governance of other’s protocols. The treasury swap will also provide a “strategic advantage” for Aave in the “Balancer wars.”
As previously reported by CryptoPotato, Aave proposed the creation of a stablecoin called GHO, pegged to the US dollars. Based on the proposal, Aave users will be able to mint the stablecoin against the supplied ratio of collaterals.