Aave has proposed a complete replace to its financial framework, specializing in income distribution, staking incentives, and liquidity administration.
The proposal, launched by Aave Chan Initiative (ACI) founder Marc Zeller on March 4, is taken into account a pivotal growth in Aave’s evolution. He acknowledged:
“We contemplate it crucial proposal in our historical past.”
Based on the proposal, Aave has persistently expanded its market presence over the previous two years, constructing a robust monetary basis.
Regardless of fluctuating market circumstances, Aave continues to generate sturdy income, with the DeFi protocol’s liquid reserves surging by 115% to achieve $115 million. This robust monetary place permits Aave to proceed with its tokenomics improve whereas staying aggressive.
An important side of the proposal is the institution of the Aave Finance Committee (AFC), a governance-backed entity accountable for managing treasury funds and liquidity methods.
The AFC will oversee monetary allocations inside Aave’s ecosystem, guaranteeing sustainable income distribution.
The initiative contains contributions from key stakeholders, together with Chaos Labs, TokenLogic, Llamarisk, and ACI.
Buyback technique
The AFC will handle a six-month AAVE buyback program to boost token worth and ecosystem sustainability, allocating $1 million weekly. In the meantime, this system could increase primarily based on Aave’s monetary well being, pending additional governance approval.
The AFC can execute purchases instantly or collaborate with market makers to amass AAVE from secondary markets. These tokens will then be distributed to the ecosystem reserve.
TokenLogic, a monetary companies supplier for Aave DAO, will construction buybacks primarily based on the protocol’s general price range. The aim is to finally match—and surpass—all protocol expenditures associated to AAVE whereas sustaining a cautious treasury strategy.
With new income streams anticipated in 2025, the AFC could suggest rising the buyback price range. TokenLogic will decide which property finance these purchases, adjusting methods month-to-month primarily based on Aave’s treasury composition.
Introducing ‘Umbrella’ for threat mitigation
Aave at the moment incurs vital liquidity prices, amounting to $27 million yearly. To optimize capital effectivity, the proposal suggests consolidating staking and liquidity administration underneath a brand new system referred to as Umbrella.
This mechanism is designed to offer unmatched safety in opposition to dangerous debt—an space the place rivals have largely retreated.
By providing this safeguard, Aave strengthens its place, notably for institutional individuals cautious of on-chain dangers.
In the meantime, Umbrella could be built-in throughout a number of blockchain networks, together with Ethereum Mainnet (Core & Prime cases), Avalanche, Sonic, Arbitrum, Gnosis, and the Coinbase-backed Base community.
LEND deprecation
The proposal additionally seeks to finalize the transition from LEND, Aave’s unique governance token, earlier than the 2020 improve to AAVE.
The plan includes freezing the LEND migration contract to reclaim 320,000 AAVE tokens valued at roughly $65 million.
The proposal famous that the neighborhood had ample time to finish the transition and urged closing the migration course of.
Following this, the DeFi protocol’s governance might resolve find out how to allocate these recovered funds—whether or not for development initiatives, safety enhancements, or token burns.
Anti-GHO
Aave additionally proposes launching Anti-GHO, a brand new rewards mechanism designed to enhance incentives for GHO stablecoin holders. This characteristic would exchange the present low cost mannequin with a non-transferable ERC20 token.
Anti-GHO could be distributed to AAVE and StkBPT stakers. Holders might burn the token at a 1:1 ratio in opposition to GHO debt or convert it into StkGHO.
The issuance of Anti-GHO could be instantly linked to income generated from GHO. A governance-determined proportion of income from GHO facilitators could be allotted towards minting and distributing Anti-GHO.
This strategy ensures that incentives stay sustainable and scale proportionally with Aave’s development.
Nevertheless, implementing Anti-GHO could require further growth and auditing. The characteristic may very well be launched in a future Aavenomics Half Two proposal.