Aave (Aave) Proposes New Revenue Redistribution Model to Reward Stakers

A yet-to-be approved draft proposal, which would overhaul the funds coming in and out of DeFi lending protocol Aave, is currently under consideration.

Key Takeaways:

A yet-to-be-approved draft proposal, which would massively overhaul the funds coming into and out of DeFi lending protocol Aave, is currently pending approval from the protocol’s users.

Dubbed “Aavenomics,” the proposed changes focus on creating a better deal for AAVE token holders, augmenting the protocol’s financial footing, and optimizing its liquidity handling. The proposal, put forth on March 4th by founder Marc Zeller of the Aave Chan Initiative (ACI), is now pending community ratification.

Zeller considers this proposal “the most important” in Aave’s history, with its approval leading to major ramifications for Aave tokenomics.

Introducing New Revenue Redistribution Model Rewards AAVE stakers

The proposal's core component implements a new stage of the revenue redistribution model to ensure better reward for AAVE stakers. The current GHO staker program “Merit” will remain enabled.

Anti-GHO Token: A major innovation is the introduction of the “Anti-GHO” non-transferable ERC-20 token earned from AAVE and StkBPT staking. This token is used to pay off GHO debt on the Aave protocol or can be redeemed for StkGHO, which is eligible for the “Merit” program and other incentives. The Anti-GHO Mechanism will replace the GHO discount system, allowing broader revenue sharing with AAVE stakers.

Anti-GHO Financing: Leave more than half (50%) of GHO revenue to create and distribute Anti-GHO with 80% of Anti-GHO rewards to StkAAVE holders and 20% to StkBPT holders. Given that GHO is currently a $12 million/year protocol revenue generating asset, this makes up roughly $6mm worth of Anti-GHO being distributed to Aave stakers.

Umbrella Safety System: Securing Aave from Monopoly Market Dynamics

One important innovation proposed by “Aavenomics” is “Umbrella”, a new safety module that aims to shield Aave users from the effects of bad debt.

The “Umbrella” model increases user protection as well as security, liquidity and the ability to create new financial products for Aave.

Token Buyback Program – AAVE Value Enhancement

The ACI has also set forward a plan for token buyback and redistribution. This proposal would assign the Aave Finance Committee (AFC) the role of buying AAVE tokens on the secondary market and transferring them into the ecosystem reserve.

Closing the LEND Chapter

The proposal also corrects a bit of Aave’s history by formally deprecating the LEND-to-AAVE migration contract. LEND is Aave’s original governance token before the platform’s upgrade to AAVE in 2020.

Aave: The Dominator of DeFi Lending

The move towards “Aavenomics” coincides with Aave’s establishment as the largest DeFi lending protocol. According to DefiLlama, DeFi lending protocols hold $39.5 billion in TVL, up from just $10.6 billion at the end of 2022. Aave has the highest TVL of $17.5 billion across 14 blockchains.

Despite market fluctuations, Aave continues to generate strong revenue, recently earning $8.3 million in fees over seven days, with net deposits hitting $33.4 billion on Jan. 25—surpassing 2021 levels. Its influence extends beyond its ecosystem, as projects like Kamino Finance have adopted Aave’s model on Solana. While many DeFi projects gain traction, Aave’s size and revenue cement its authority in the space.

The AFC: A New Era in Treasury Management

In order to manage Aave’s treasury properly and drive forward this ambitious set of changes, we put forward the need for an Aave Finance Committee (AFC) to be created.