With the launch of the liquidity recovery program on Monday, Aave is arguably on the verge of becoming the dominant DeFi management protocol.
Earlier today, the Aave Improvement Proposal (AIP) quorum was 16, which means that starting Monday, liquidity providers and borrowers in the Aave USDC, DAI, USDT, GUSD, ETH and WBTC groups will receive StAAVE bonuses on Monday. In addition to the standard. Interest rate return.
According to AIP 16, suppliers and borrowers will share 2,200 stAAVE tokens per day from AAVE’s existing protocol ecosystem reserve of 2.9 million, which is currently nearly $ 1 billion.
The proposal, written by Parafi Capital Aave investor Anyang Vinod, notes that the program aims to “stimulate lending and lending activities across multiple markets”, in addition to increasing the decentralization of protocol governance by distributing governance codes to more users.
This step is something new for Euwe. The lending platform is consistently ranked among DeFi’s biggest protocols despite not having a liquidity restoration program like many of its competitors. According to their apps, Compound is currently the best lending protocol with a Total Locked Value (TVL) of over $ 15.4 billion in their market, while Aave has $ 6.8 billion in the Polygon marketplace, Ethereum v1, and Ethereum. Version 2 and AMM LP.
Aave co-founder Stanny Koleshev told Cointelegraph he expects additional incentives to significantly boost the TVL protocol.
He said, “In the proposal, most of the bonuses are distributed in stable currencies, which means that we will see a significant increase in TVL.”
As mentioned in the “management proposal,” the lack of a liquidity extraction program has historically given Aave some competitive advantages. For example, at the time of writing, Compound is offering a return of 3.31% on USDC stablecoins, plus 2% of COMP management tokens for a total return of 5.51%. Today Aave Market also offers a 5.51% net interest rate.
A recent tweet from Aave developer Emilio Frangella indicates that the new program will boost returns in an order of magnitude, particularly providing returns to borrowers – income that, at current interest rates, will far exceed April borrowers owing their loans.
While the current program is scheduled for the end of 05/15/2021, the door is open for some form of liquidity transactions that will continue in minutes for the foreseeable future. According to Vinod, “This program is being offered as a beta to explore more about how to benefit from the inclusion of cash management rewards in the Aave ecosystem,” and at a rate of distribution of 2,200 per day, the program will clean up only 5% of the ecosystem backup tokens. In the year.
When it was first proposed in managers’ forums, Liquidity Management received only 60% of support from the public. Kulechev believes the turnover is partly due to the fact that the company considers other liquidity recovery programs to be successful.
“The Aave community has had pros and cons about this in the past, mainly against the Aave protocol which has succeeded in organic growth. But since the network effects of liquidity mining are now proven effective, this makes it possible to try Aave, and there may be a reason for this shift.”