• Aave's new liquidity program would allow lenders and borrowers to earn more rewards in addition to their standard interest yield.
  • The goal of the new scheme is also to increase the decentralization of the protocol's governance.
  • The added incentives could significantly drive up Aave's total value locked.

Decentralized finance protocol Aave has started its liquidity mining program after the Aave Improvement Proposal (AIP) 16 put forth by user Anjan Vinod has reached quorum.

Aave had a competitive disadvantage

Demand for DeFi’s concept of liquidity mining has been steadily growing, where lenders and borrowers are rewarded with the protocol’s native tokens. 

To catch up with the rest of the decentralized finance market, Aave has launched its own yield farming program, allowing liquidity providers and borrowers to earn stAAVE rewards in USDC, DAI, USDT, GUSD, ETH and WBTC pools on top of its standard interest yield. Lenders and borrowers in the liquidity pools will split 2,200 stAAVE tokens per day from the 2.9 million AAVE ecosystem reserve, which accounts for roughly $1 million.

Prior to the launch, Aave had never implemented a liquidity mining program despite the meteoric growth in the popularity of yield farming. The lending platform has consistently ranked high among the largest DeFi protocols. The current top lending protocol – Compound – has over $8.91 billion in total value locked, while Aave sits right behind with $7.15 billion in TVL.

According to Aave co-founder Stani Kulechov, the added incentives could boost the protocol’s TVL significantly. He added:

The proposal allocates most of the rewards on stablecoins, meaning that we will see a substantial increase in TVL.

The AIP 16 proposal put forward by Anjan Vinod, an investment analyst at Parafi Capital, mentioned that the program's goal is to “drive lending and borrowing activity across markets” and distribute governance tokens to more users, increasing the decentralization of the protocol’s governance. 

Initially, the Aave community only received roughly 60% support from its community for the proposal when first published on governance forums. However, seeing the success of other liquidity mining schemes, the community changed their views and provided the protocol with an opportunity to experiment in the new initiative. 

According to Vinod, the program could be used as a beta to investigate further how liquidity mining rewards could benefit the Aave ecosystem. Aave is expected to end its program in July this year but is open to continuing some form of liquidity mining in the future. 

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Bitcoin Weekly Forecast: Assessing chances of one last bear market rally for 2022

Bitcoin Weekly Forecast: Assessing chances of one last bear market rally for 2022

Bitcoin price is in a good place to trigger another bear market rally from a high-time frame perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending to 2022.

More Bitcoin News

Uniswap price could kick-start a 14% rally if it reclaims this level

Uniswap price could kick-start a 14% rally if it reclaims this level

Uniswap price has been following the broader market bullish cues over the last few days sustaining its rise from 48 hours ago. Although the sentiment seems to have shifted slightly, UNI holders can still book profits if the Decentralized Finance (DeFi) token climbs to this level.

More UniSwap news

ATOM price suggests bears are still in control for these reasons

ATOM price suggests bears are still in control for these reasons

Cosmos price is producing a countertrend rally after suffering a steep decline throughout the month. If market conditions persist, ATOM could wipe out newly established bullish positions. Key levels have been defined to gauge ATOM’s next potential move.

More Cosmos news

Cardano Price Prediction: A new yearly low before the bounce

Cardano Price Prediction: A new yearly low before the bounce

Cardano price has suffered a vicious downtrend move throughout November. Ss price consolidates, the technicals suggest a bounce occurs while on-chain metrics hint that investors are considering securing profits sooner than later.

More Cardano news

Bitcoin: Assessing chances of one last bear market rally for 2022

Bitcoin: Assessing chances of one last bear market rally for 2022

BTC is in a good place to trigger another bear market rally from a high-time frame perspective. This development, combined with the optimistic outlook seen in on-chain metrics, further strengthens the possibility of a happy ending to 2022.

Read full analysis

BTC

ETH

XRP