Governance

The Aave Protocol is governed by the AAVE token holder community through procedures, voting, and smart contract execution, collectively known as Aave Governance.

All instances of the Aave Protocol are governed by the AAVE, stkAAVE, and aAAVE token holders on Ethereum mainnet. Aave Governance V3, developed by BGD Labs, introduces the ability to vote on lower transaction fee networks such as Polygon POS and Avalanche C-Chain while token balances remain on Ethereum mainnet.

Aave Governance V3 is designed with a modular architecture to meet the comprehensive needs of an on-chain DAO like Aave. The system is divided into three main components, each corresponding to different stages in the proposal lifecycle:

Communication between these components is facilitated by the Aave Delivery Infrastructure (a.DI), providing secure and efficient cross-chain interactions. Additionally, the Aave Robot automates permissionless actions in Aave Governance such as queueing and executing proposals.

In Governance V3, each proposal specifies a voting network and all voting for the proposal occurs on this network. The Governance V3 activation enables Polygon POS, Avalanche C-Chain, and Ethereum Mainnet (backup) as initial voting networks.

Voters do not need to migrate funds to the voting network, all governance token balances and delegations are still stored on Ethereum mainnet, and are validated on the voting network using storage proofs.

Voting is performing by calling the submitVote() function on the VotingMachine of the corresponding proposal’s voting network.

An aave-cli has been developed to generate the necessary storage proof parameters, or voting can performed with the GovernanceV3Helpers Foundry script.

AAVE, stkAAVE (AAVE staked in protocol safety module), and aAAVE (aToken representing AAVE supplied to Ethereum V3 market) token holders receive governance powers proportional to the sum of their balances on Ethereum mainnet.

There are two powers associated with each governance token:

Governance powers can be either jointly or separately delegated to any Ethereum address.

Smart contract wallets cannot sign messages for storage proof voting and may not exist on all networks, this creates a challenge to interact with the cross-chain voting contracts.

To accommodate cross-chain voting for smart contract wallets and allow greater flexibility for all governance participants, wallets have the ability to link a representative address on other chains.

To choose a representative, an address in Ethereum should call the updateRepresentativesPerChain() function on the GovernanceCore smart contract.

This representative address is able to vote on the specified network, using the delegators balances and received delegations on Ethereum Mainnet. An address can be the representative of multiple other addresses.

Aave Governance V3 uses block hashes on the Core network (Ethereum Mainnet) as the source of information for voting balances, and storage proofs as the core mechanism for validation.

For any proposal, the system takes a “snapshot” (block hash of the block before activateVote method gets called) of voting token balances/delegations on the Core network, forwards it to an Aave Voting Network and sets it as the main source of balances/delegation to validate against whenever an address submits a vote there.

Ethereum block hashes contain the state tree of the network, which in turn contains all the data of all the smart contracts at that exact block. Amongst those contracts: AAVE, stkAAVE, and other voting assets are present, and within them, the balances and delegations of all Ethereum addresses.

Storage proofs are a mechanism allowing to cryptographically prove that a piece of data is contained in a tree. In this case, they allow proving that a specific address has voting balance/delegation on the state tree of an Ethereum block.

What happens in practice when an address votes is that the voter inputs the balance of the voting assets they hold at the proposal's Ethereum block, together with a storage proof over the Ethereum block hash for that proposal. The Voting Network then cryptographically verifies the storage proof against the Ethereum block data, along with all additional validations (e.g., no double-voting), and stores the results accordingly.