This proposal seeks community feedback for a strategic partnership between Instadapp and Aave DAO through a $4M sale of $INST tokens at a 350M FDV, aiming to strengthen collaboration and alignment between both protocols.
Motivation
Instadapp has long-term relations with Aave and was one of the first protocols to support Aave lending market. Since then, Aave products have been supported across all Instadapp products such as Instadapp Pro, Lite, Avocado, and Fluid.
Aave sees Fluid as a major partner in strengthening GHO and AAVE liquidity which is also beneficial for Fluid as it grows its overall liquidity. Additionally, Aave will use â…“ of the purchased amount to incentivize liquidity on Fluid, meaning that Instadapp community will be directly incentivized by Aave DAO.
The purchase price was proposed based on the average $INST price in early-mid November when the informal communication was initiated. After Aave published the proposal, it sent a strong signal to the community indicating that Fluid is a safe and major DeFi infrastructure, and $INST FDV has increased by almost 100%, already benefiting the Instadapp community.
The partnership would benefit both protocols by:
Strengthening the relationship between two major DeFi protocols
Supporting GHO adoption through Fluid integration
Ensuring priority support for Aave protocol integrations
Creating mutual value through governance participation
Specification
The proposal includes the following key components:
Instadapp and Aave DAO and service providers will implement a strict standard of non-hostility policy regarding each other’s products and team members in public communications.
Instadapp will provide support and promotion for GHO and Aave integrations across our products.
Instadapp will receive priority and tailored support for integrations including the provision of free flashloans to the Instadapp protocol.
â…“ of the purchased INST amount will be used to incentivize liquidity on Fluid
â…” of the purchased amount will be vested for 1 year with delegation to Aave Protocol Embassy for active participation in Fluid governance.
Conclusion
This partnership aims to strengthen relations with the major DeFi protocols such as Aave and showcase the efficiency of Fluid DEX on the example of GHO and in the future Aave liquidity. A collaborative approach will help Fluid to grow its markets and secure DEX as the dominant player on the market.
Sound good! Selling to aave at $350M FDV might still be a beneficial deal as 1/3 of it would be distributed as incentives to us users.
But 1 thing I want to understand is that what benefits would a free flash loan bring to us?
Fluid can leverage free flash loans to streamline the process of taking a leveraged position. By integrating an optional button, users can enter a leveraged position in a single transaction instead of multiple ones. This approach simplifies the process and significantly reduces the gas fees required to execute the position. This is one potential use case for free flash loans, offering a direct and tangible benefit to users, there are multiple.
The proposal discussion was posted on the Aave Governance Forum on November 24th. At that time, the $350M valuation roughly corresponded to the valuation of INST at that time. However, Aave governance requires a defined discussion period (at least 7 days after discussion) before pushing the AIP to a vote. During this period, information about Aave’s potential purchase of INST, the potential of Fluid, and the ongoing bull market impacted INST’s price.
On December 7th, the proposal passed on Aave governance after an on-chain vote, and the Aave DAO allocated $4M worth of GHO for the purchase. The next steps now depend on Instadapp / Fluid governance.
While the valuation may not perfectly match your expectations, @Jadmat, I believe it is a fair price for the following reasons:
Fluid Incentivization: Aave DAO plans to allocate one-third of this budget to incentivize Fluid’s growth. This approach is expected to help expand Fluid’s TVL and attract new users, making it a strategic investment aimed at long-term growth.
Strategic Partnership: Aave DAO and Instadapp share a long-standing relationship, with both teams having mutually recognized each other’s contributions. Aave DAO’s investment reflects its commitment to Fluid’s long-term potential, similar to its previous strategic investments (e.g., with Curve). The purchase aims to strengthen the collaborative alignment between the two protocols and their governance.
Vesting Period: To further demonstrate the long-term intent, Aave DAO agreed to a one-year vesting period for the remaining two-thirds of the purchase. This structure underscores Aave’s goal of fostering sustainable collaboration, rather than pursuing short-term gains.
Disclaimer:
I currently hold both INST and Aave tokens bought on the secondary market.
I have not received any compensation to write this or to participate in this governance discussion.