Risk Manager Gauntlet Terminates Relationship with Aave, Citing DAO Dysfunction

Gauntlet co-founder John Morrow said his team "found it difficult to navigate the inconsistent guidelines and unwritten objectives" of Aave's "largest stakeholders."

AccessTimeIconFeb 22, 2024 at 12:01 a.m. UTC
Updated Mar 8, 2024 at 9:57 p.m. UTC

Blockchain risk management firm Gauntlet has broken off its four-year-long relationship with the decentralized lending platform Aave, citing difficulty working with the decentralized autonomous organization (DAO) that governs the protocol.

In a post in the Aave forums, Gauntlet co-founder John Morrow said his firm was terminating its relationship with the lender because his team "found it difficult to navigate the inconsistent guidelines and unwritten objectives" of Aave's "largest stakeholders."

Gauntlet is a key player in decentralized finance (DeFi), its risk management services used by several of the largest crypto protocols and DAOs. Gauntlet served as a "Risk Steward" for Aave, which involved overseeing the platform's risk levels, providing regular updates to the Aave community, and manually setting certain lending and borrowing parameters. Morrow said in his post that Gauntlet would begin "working with other contributors to find a replacement" Risk Steward so as not to leave the DAO high-and-dry.

Aave, which initially launched on Ethereum in 2017 and has since expanded to other ecosystems, is one of the largest decentralized lending platforms. The protocol has $11 billion locked in its system, which investors use to borrow and lend cryptocurrencies without middlemen.

Holders of the AAVE token are collectively referred to as the "Aave DAO" and are tasked with voting on key decisions governing the platform, such as setting interest rates and managing risk. The DAO offloads some of these responsibilities to professional partners like Gauntlet, which handle certain day-to-day operations on behalf of the DAO, actively engage with the DAO community and formulate governance proposals for key parameter changes.

Partners like Gauntlet are paid by the DAO's treasury, and contracts are proposed and approved via formal Aave DAO governance votes.

Gauntlet's decision to terminate its relationship with Aave was met with swift backlash from some members of the Aave community.

"[P]ersonally I’m disappointed about the trust that the Aave DAO put on Gauntlet being broken in the middle of the engagement," Ernesto Boado, Aave's former CTO, said in a forum post responding to Gauntlet's exit announcement. "I obviously respect the decision if other business considerations exist, but simply can’t agree that Aave mistreated Gauntlet."

Marc Zeller, a major figure in Aave's governance community who previously fought against renewing Gauntlet's service agreement with the protocol, suggested Gauntlet was "looking into external business opportunities" and called its stated rationale for leaving the protocol a "poor excuse."

Zeller's characterization of Gauntlet's motives was disputed in a reply from Nick Cannon, Gauntlet's vice president of growth.

"What everyone is missing in the resignation post, is the community wants exclusivity from Gauntlet without paying for it," Cannon added in a direct message to CoinDesk on X. "Chaos, our risk counterpart, doesn’t have the same restrictions."

Gauntlet's decision to separate from Aave was made to "optimize growth and continue our mission," said Cannon.

UPDATE (Feb. 22, 2:25 UTC): Adds statement from Nick Cannon, Gauntlet's vice president of growth.

Edited by Bradley Keoun.


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Sam Kessler

Sam is CoinDesk's deputy managing editor for tech and protocols. He reports on decentralized technology, infrastructure and governance. He owns ETH and BTC.