[RFC] Aave’s CDP for Uniswap V4 Positions

Requests for Comment
22

Thank you @eek637, the Uniswap Foundation, and broader community for the thoughtful feedback. Aave Labs fully respects UF’s focus on native protocol growth through hooks and Unichain. To clarify, the grant is being requested from the Uniswap DAO, rather than the Uniswap Foundation itself. Additionally, the scope of this proposal will expand to other networks, including Unichain as a prime candidate.

After extensive technical exploration, it was concluded that the proposal cannot be easily implemented using hooks alone - which would introduce unnecessary complications and be error prone. To support risk management, oracles, and liquidations, Aave Labs built a custom position manager that integrates directly with Aave’s infrastructure. While the Uniswap interface doesn’t currently support custom managers, this module is designed to remain fully compatible with the Aave Interface.

Aave Labs has spoken with several Uniswap delegates to gather their feedback and adjust the proposal accordingly. During these conversations, it was also noted that, regarding tax concerns, the proposed fee mechanism aligns with how existing protocol fees are currently handled in the Uniswap protocol and nothing additional is needed when the fee switch goes into effect.

The proposal is an opportunity to grow the Uniswap ecosystem together with Aave’s deep liquidity and stablecoin infrastructure, benefiting both protocols.

23

Hello @Avantgarde - happy to provide more clarity around the budget, incentive strategy, and the rationale behind the delegation.

On the $3.3M UNI grant: this request is meant to cover the full lifecycle of the integration over an 18-month window. It includes continued R&D on the Uniswap V4 Position Manager, integration with Aave’s risk layer and oracle infrastructure, as well as ongoing security reviews and audits. As with any collateral-backed lending product, especially one tied to volatile LP positions, we expect multiple audit rounds. The budget also accounts for maintenance and iteration post-launch as the market evolves, and for growth efforts such as onboarding support and frontend enhancements, including integration with Aave V4, which will potentially require a new design spec and more audits.

Aave Labs has already invested heavily in the early architecture and design phases, and the grant helps accelerate full deployment. While the ask comes from the Uniswap DAO, the Aave DAO is contributing in-kind through liquidity provisioning (GHO), risk infrastructure, and operational support.

Regarding the additional UNI allocations, the goal is to drive meaningful adoption while aligning long-term governance interests. The delegation to Aave DAO ensures protocol-level alignment and involvement in the governance process. The liquidity incentives will be managed by the Aave DAO Liquidity Committee and are modeled after proven growth strategies across DeFi. The milestone-based tranches only unlock once clear usage thresholds are met, which helps maintain accountability and impact.

On the broader topic of permissionless integration versus collaboration

While it is true that products that implement similar features on top of previous Uniswap iterations exist, the broader scope of this proposal encompasses a full collaboration between the two most prominent DeFi protocols rather than a simple permissionless integration. Aave Labs believes that the current proposal brings some important benefits for Uniswap over a simple ad hoc integration:

  1. This feature would be built under the Uniswap brand and become part of the Uniswap ecosystem, not as a standalone protocol - factually adding a new feature to the existing Uniswap infrastructure, rather than building a new product on top.
  2. Access to the very deep Aave liquidity and battle tested risk management infrastructure; As pointed out before by some community members, it is common occurrence for Aave to become the most liquid venue for new asset classes (eg Pendle Tokens) very quickly once these assets get access to Aave liquidity. Other products require ad hoc liquidity provisioning, which is a major factor limiting their ability to scale.
  3. The proposal encompasses a meaningful revshare component, exclusively generated by the borrowing demand, with the Uniswap DAO that is not present in existing products and wouldn’t necessarily be present in permissionless integrations.
  4. Integrating the functionality at a deeper level in the uniswap protocol, rather than for example wrapping the LP positions, allows for a more gas efficient and less convoluted implementation.

Ultimately, this proposal is meant to be a temperature check to understand if a broader collaboration between the two largest DeFi protocols is something of interest for both DAOs. Given that the tool represents a great opportunity for growth for Aave and Aave Labs already defined specification and prototype implementation, it will be implemented as a permissionless integration, should this proposal not move through - but the upside for the Uniswap DAO will be much more limited.

24

Thank you @Tane for the questions and considerations. The figures outlined in the proposal are scenario estimates rather than fixed forecasts. Capturing 50% of the TVL represents the bull-case outcome and therefore defines the final milestone. The milestone structure is intentionally front-loaded toward that 50% threshold so that the incentives and the revenue-sharing schedule are impacted once material traction is demonstrated.

GHO is proposed as the initial asset because its native fee mechanism provides flexible, onchain revenue that can be programmatically shared between the Aave and Uniswap DAOs from day one. Once Aave V4 is live, its modular architecture will allow additional assets to be integrated without re-engineering the core module, broadening borrowable options while preserving a clear fee-sharing pathway.

Under the current design, the insolvency risk is borne exclusively by the Aave DAO through its protocol liquidity. The Uniswap protocol is not exposed to such risk; its economic exposure is limited to the discretionary UNI incentives committed by its DAO. Consequently, the proposal already aligns risk with the party best equipped to manage it, while affording Uniswap upside participation through the shared-fee model described above.