Decentralized finance [DeFi] lending giant Aave announced the initiation of its liquidity mining program for V2 after the Aave Improvement Proposal [AIP] 16 received “overwhelming” affirmative votes from the community on the 24th of April and was officially executed.
The AIP was put forth by user Anjan Vinod, who happens to be an investment analyst at blockchain and DeFi focussed investment firm, ParaFi Capital. The launch of liquidity mining incentives for the Aave V2 protocol includes paying out governance token rewards exceeding 20% to users who borrow stablecoins. According to the DeFi platform, most of the rewards will target stablecoins in a bid to boost stablecoin liquidity.
The lending platform revealed that 2,200 staked AAVE [stkAAVE] will be allocated at a 50/50 ratio between depositors and borrowers until the 15th of July and is worth approximately $880,000 at press time prices. The distribution strategy is based on the markets’ borrowing demand.
Over two-thirds of rewards have been directed to the stablecoin USD Coin [USDC] and Tether [USDT] markets. The remainder of around 33% is being distributed among Aave’s DAI, ETH, wBTC, as well as GUSD markets. The platform’s official tweet detailing the announcement read,
“AIP 16 increases the liquidity in the Aave Ecosystem Reserve, which can be used to fund grants, devs, and builders through a community-led grants programme (currently an ARC on the governance forum) EyesHandshake”
The main objective of the program’s goal is further advance the lending and borrowing activity across markets and amplify the decentralization of the protocol’s governance that can be achieved by the distribution of governance tokens to more number of users.
In the beginnng, it only acquired around 60% support from its community for the AIP when first published on governance forums. The community had a change of heart after witnessing the success of other liquidity mining schemes following which they let the platform experiment in the new initiative.
Aave’s TVL Shoots Up To ATH
According to the latest stats by DeFi Pulse, the total value locked [in USD] in the open-source non-custodial protocol has surged to a fresh all-time high of $7.52 billion on the 27th of April. At the time of writing, it became the third-largest DeFi protocol on Ethereum trailing behind other lending platforms – Maker and Compound.