Aave’s $1.6m risk adviser Gauntlet calls it quits over ‘inconsistent’ DAO objectives

DeFi risk management firm Gauntlet has parted ways with lending protocol Aave over difficulties working with the DAO and its largest stakeholders.

In a post on the Aave governance forum on Wednesday, Gauntlet COO and co-founder John Morrow said his firm will terminate its payment stream as soon as possible and will work with other Aave contributors to find a replacement for its role in the DAO.

“Gauntlet is no longer able to continue our work with Aave,” Morrow said.

Morrow highlighted several incidents where Gauntlet received criticism from Aave community members that led to the firm’s decision to depart. At the beginning of February, Gauntlet was criticised for setting up a way to distribute ARB token emissions to Aave users, only to receive overwhelming support for a similar proposal to distribute OP tokens days later.

“In the past year, we’ve found it difficult to navigate the inconsistent guidelines and unwritten objectives of the largest stakeholders,” Morrow said. “Because of all of this, the best place to continue Gauntlet’s mission is elsewhere.”

Gauntlet has served as Aave DAO’s independent risk manager since 2020. In the role, the firm monitors risks to Aave’s lending markets, such as liquidation risks, deployments on new blockchains, and accepting new assets as collateral, among other things.

Aave is Ethereum’s biggest lending protocol with over $8.3 billion in deposits. The protocol is governed through a decentralised autonomous organisation — or DAO — structure, meaning AAVE token holders propose and vote on changes to the protocol and its management.

Aave DAO renewed Gauntlet’s services in December at a cost of $1.6 million annually. Gauntlet had initially requested $2 million.

Previous clashes

In its four years serving as an independent risk manager to Aave DAO, Gauntlet has clashed with Aave stakeholders numerous times.

In July, Gauntlet proposed that Aave DAO freeze Curve tokens and set the loan-to-value ratio for Curve on Aave v2 to zero to mitigate risks posed by Curve Finance founder Michael Egorov’s $65 million loan position on the crypto lending protocol.

In response, Aave stakeholders accused Gauntlet of pushing for a proposal that the DAO had already voted on and dismissed.

At the time, Aave DAO delegate Marc Zeller, who has been critical of Gauntlet on several occasions, said that the firm’s “attempt to sneak it back in another proposal has been noted and will be remembered.”

“We have no strong preference to push, or sneak, anything through,” Gauntlet CEO Tarun Chitra told DL News at the time. “In our experience it’s good to temp check the community when there is no reactive urgency perceived.”

Then in December, Gauntlet recommended that Aave DAO wait until its GHO stablecoin traded at its intended dollar peg before introducing the GHO Stability Module, a protocol that would let anyone who holds GHO redeem the token for USDT or USDC on a one-to-one basis.

When put to a vote, Aave token holders voted to implement the GHO Stability Module immediately, despite Gauntlet’s recommendation.

Gauntlet is not the only DAO service provider to butt heads with the Aave community.

In August, Aave DAO members voted in favour of reducing payments to its DeFi management company Llama, which provides treasury management for Aave DAO and upgrades for the Aave lending protocol.

Aave stakeholders said Llama had “fallen short of expectations” on several occasions.

Llama, the onchain governance company, is unrelated to Llama Corp, which owns DL News.

Correction: This article previously stated that Aave renewed Gauntlet’s services for $2 million in December. This has been corrected to $1.6 million.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out to him with tips at tim@dlnews.com.