PowerPool x AAVE: ASSY index collaboration

Collaboration between two decentralized protocols based on a brand new index proposal starts now

Recently two indexes were launched in the PowerPool ecosystem — PIPT and YETI holding $18m TVL. AAVE is a composite protocol of the PIPT index. Index contract currently holds ~15k of AAVE tokens which will be used in future votings in AAVE v2 governance.

Recently AAVE team member Marc Zeller came up with the idea of a brand new index — ASSY, consisting of YFI, AAVE, SUSHI, and SNX tokens. The main purpose of new index implementation is to unite four Defi governance and cashflow-generating assets into one token, providing not only exposure to these ecosystems, but also diversified cashflows and meta-governance voting participation.

PowerPool x AAVE community collaboration will bring a new level of protocols integration and community involvement in meta-governance and participation in AAVE staking

PowerPool x AAVE: value proposition

PowerPool is a meta-governance protocol based on Smart indexes, which can use pooled assets to generate cashflow for index token holders. It allows users to hold a basket of popular assets in a single token, receive cashflows generated by their usage, and participate in voting in each protocol as well.

Community collaboration includes the launch of a new index (note, that the CVP community should approve it via governance proposal first), integration of AAVE v2 governance into the PowerPool governance system, and AAVE staking as well.

PowerPool provides the following value to the AAVE community based on PIPT and the upcoming ASSY index:

1. Flexible options for holding AAVE tokens in a diversified portfolio and receiving all benefits from that. Now users can use the PIPT index for that. Using the new ASSY index there will be one more option to have a portfolio with AAVE and other productive Defi assets in one.
2. Receiving cashflows from AAVE ecosystem holding a diversified portfolio of Defi tokens.
   The ASSY Index contract will deposit AAVE into the AAVE Safety module, harvesting APY distributed to ASSY index token holders
3. AAVE Meta-governance. All AAVE tokens pooled into the index contract will participate in AAVE votings based on community decisions. Note, that PIPT already holds 15k of AAVE and ASSY AAVE holdings will be added to that combining into one stake into the AAVE safety module. It will increase engagement in AAVE governance and contribute to solving Voters’ Apathy.
4. Smart liquidity sink and market support. PowerPool indexes store user-owned tokens on the special contract and are balanced by arbitrageurs. So, AAVE tokens will be additionally deposited to the index contract based on arbitrage trades in case of AAVE price drop.

AAVE provides value to PowerPool in the following ways:

1. by launching a new ASSY index
2. community engagement and marketing
3. additional fees generated by ASSY index operation. We remind that fees charged from users of PowerPool indexes are collected into a special treasury contract, belonging to CVP token holders community.

AAVE staking and meta-governance implementation

The ASSY index uses pooled AAVE for staking in AAVE Safety module, allowing to generate cashflow for index holders and participate in AAVE governance. The same solution is applied to the PIPT index.

When it comes to voting in AAVE, AAVE Safety Module stakes from different indexes are combined into a single one. AAVE governance system considers it just as one address staking AAVE.

Index contract stakes AAVE into AAVE safety module. Since at the same time AAVE is required for swaps, a reserve approach is used:

1. When new AAVE tokens are deposited to the index contract, a certain share of them is deposited to the AAVE Safety module and wrapped. Wrapped tokens are stored on the index contract.
2. During every wrap/unwrap operation contract checks reserve ratio. If this ratio is higher than necessary, the contract checks out the cooldown period.
3. If a cooldown period wasn’t launched, the contract initiates it.
4. If a cooldown period was already initiated, the contract checks out every time for an unstake window.
5. If unstake period is running at the moment of checking, the contract withdraws a certain number of AAVE tokens if the number(AAVE on the contract) > target reserve value and adds some AAVE tokens in the opposite case

Such a reserve approach allows the index contract to stake AAVE from the index to the AAVE Safety module, participate in governance, and earn APY for its users. At the same time, AAVE-based indexes can be still used for token swaps.