The Monday announcement made for the liquidity mining program enables Aave to be on the rim of being one of the dominant decentralized finance (DeFi) lending protocols.
Earlier today, the Aave Improvement Proposal (AIP) 16 reached quorum. Reaching 16 quorum implies that 4/26 liquidity providers and borrowers in Aave’s namely, USDC, DAI, USDT, GUSD, ETH, and WBTC pools will earn stAAVE rewards in addition to their standard interest yield.
According to AIP 16, lenders and borrowers in these pools will split 2,200 stAAVE tokens per day. The tokens will be split from the protocol’s current 2.9 million AAVE Ecosystem Reserve, that currently worth nearly $1 billion.
An investor Parafi Capital’s Anjan Vinod penned the proposal mentioning the goal of the program is
As per the governance, the proposal notifies the major disadvantage it historically holds is the lack of a liquidity mining program. For example, at the time of writing the money market Compound offers a 3.31% yield on stablecoin USDC, along with 2% in COMP governance tokens for a total of 5.51% yield. Aave’s market, meanwhile, also currently offers an identical 5.51% in pure interest yield.
The developer Emilio Frangella In a recent Tweet indicated the offers yield to borrowers via the new program. Furthermore, according to Aave investor Vinod,
Calculating the 2,200/day rate of distribution, the program would deplete only 5% of the Ecosystem Reserve tokens per year.