A new proposal for Aave (AAVE) aims to direct 100% of its product revenue to the DAO, making the token a direct beneficiary of the protocol's cash flow. This shift could transform AAVE from a simple governance token into a profit-sharing asset, making it more attractive to fundamental investors. Future growth is expected from new products like the Aave Card and the upcoming Aave V4 upgrade, which will also support Real World Assets (RWAs). This aligns with the "revenue meta" trend, where investors should prioritize DeFi tokens with clear links between protocol profits and token value, such as AAVE and Uniswap (UNI). The proposal, if passed, positions AAVE as a high-conviction investment for capturing the next phase of DeFi's growth.

Aave (AAVE)

The discussion is centered around a new governance proposal called "Aave Will Win", which aims to fundamentally change the economic model of the Aave protocol and its token.

• The Proposal: Aave Labs, the primary development company behind the protocol, is proposing to direct 100% of the net revenue from all its current and future products directly to the Aave DAO treasury.
• The "Ask": In exchange for this commitment, Aave Labs is asking the Aave DAO for a budget to fund development and growth.
  • $42.5 million in stablecoins ($25 million primary, $17.5 million in milestone-based grants).
  • 75,000 AAVE tokens (valued at approximately $8-$10 million at the time of the podcast).
• Potential Return on Investment: The host suggests this could be a highly profitable investment for the DAO.
  • The revenue from Aave's various products was estimated to be upwards of $100 million per year.
  • This implies the DAO could recoup its investment in the labs in "one year or less".
• New Revenue Streams: The proposal unlocks multiple new revenue streams for the Aave DAO, beyond the protocol's core lending business. These come from Aave Labs' product suite:
  • Aave App: A consumer-focused application designed to feel like a mainstream fintech app, abstracting away complexities like gas fees and wallets.
  • Aave Pro: A platform for sophisticated DeFi users.
  • AaveKit: An API/SDK for enterprises and fintechs to integrate Aave.
  • Aave Card: A physical or virtual card where a portion of every swipe fee would go to the Aave DAO.
  • Swap Fees: Fees generated from users swapping collateral assets within the Aave user interfaces.
• Aave V4 Upgrade: This upcoming protocol upgrade is a key part of the growth strategy.
  • It introduces a modular architecture that will make it easier and faster to add new types of collateral and lending use cases.
  • It includes a reinvestment feature, allowing the protocol to invest idle capital from its pools into low-risk, yield-bearing assets like tokenized treasuries, creating an additional revenue source.
  • It is designed to support the expansion into lending against Real World Assets (RWAs).
• Sentiment: The sentiment is overwhelmingly bullish. The proposal is seen as a major step in maturing the protocol, making the AAVE token more "investable from an institutional standpoint" by creating clear, predictable cash flows, similar to a public company's stock.

Takeaways

• The "Aave Will Win" proposal, if passed, would establish a direct and powerful value accrual mechanism for the AAVE token, tying its value directly to the revenue generated by a growing suite of products.
• This shifts AAVE from being just a governance token to an asset that captures the profits of a multi-faceted financial business, which could attract more fundamental and institutional investors.
• The expansion into user-friendly applications (Aave App, Aave Card) and enterprise solutions (AaveKit) aims to grow the user base beyond crypto natives, significantly increasing the potential revenue for the DAO.
• The development of Aave V4 and the focus on RWAs positions the protocol to capture value from the much larger traditional finance market, not just the crypto market.

Investment Themes

The podcast highlights several broader trends that are shaping the digital asset landscape.

DeFi Sector Maturation

• The discussion emphasizes a major industry trend, referred to as the "revenue meta", where projects are moving away from "valueless governance tokens" towards tokens that have clear, cash-flowing properties.
• Protocols like Aave are beginning to structure themselves more like traditional public companies, with a focus on revenue, profit, quarterly reports, and investor relations to attract capital.
• Uniswap's (UNI) "Unification" proposal was mentioned as a similar move, where a core development team aligns its incentives with the protocol's token holders to drive growth and monetization.

Takeaways

• Investors should prioritize DeFi tokens where there is a clear and understandable link between the protocol's revenue/profits and the token itself (e.g., through fee-sharing, buybacks, or direct distributions to the treasury).
• The most successful protocols are likely to be those that can successfully blend the decentralized, resilient nature of a protocol with the fast execution and product focus of a traditional startup.

Real World Assets (RWAs)

• The tokenization and use of traditional assets as collateral in DeFi is presented as a massive growth opportunity. Stani Kulechov stated a long-term vision of using Aave to "finance the future," including things beyond crypto.
• Aave is actively pursuing this with its Horizon market and by designing Aave V4 to easily onboard and lend against RWAs.
• The ability to lend against assets like tokenized treasuries, real estate, or private credit could bring trillions of dollars of value on-chain.

Takeaways

• RWAs are considered a key catalyst for the next phase of DeFi's growth, as it connects the on-chain economy to the much larger global economy.
• Protocols that build the infrastructure to securely support RWA lending, like Aave, are well-positioned to capture a significant share of this emerging market. This could be a primary driver of protocol revenue in the coming years.