Aave Proposes New Tokenomics, Shifting Revenue and Liquidity Management

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CryptoNews2025/03/04 23:44

By:Hongji Feng

Aave governance is advancing its tokenomics overhaul, introducing changes that impact staking rewards, liquidity management, and revenue distribution. The proposed adjustments seek to enhance capital efficiency while reducing reliance on native token incentives, signaling a shift in how decentralized finance protocols approach long-term sustainability.

Last updated: March 4, 2025 12:28 EST

Aave Proposes New Tokenomics, Shifting Revenue and Liquidity Management image 0

Key Takeaways:

The tokenomics update includes the creation of an Aave Finance Committee to oversee treasury operations and fund allocation.
A new system called Anti-GHO would replace the current GHO discount model, allowing stakers to reduce debt or earn rewards.
The proposal suggests adjustments to AAVE’s secondary liquidity incentives to maintain efficiency while lowering costs.
A buyback program is also included, with governance allocating funds to purchase AAVE from the market and direct it to the ecosystem reserve.

Aave governance has introduced a proposal to update its tokenomics, focusing on AAVE staking rewards, revenue redistribution, secondary liquidity management, and the deprecation of LEND.

After half a decade of hard work, with the ACI, we're proud to present the updated Aavenomics proposal to the Aave DAO.

We consider it the most important proposal in our history, feel free to have a read and provide feedback.

Just Use Aave. https://t.co/nBhr5Q6hQB
— Marc “Billy” Zeller 👻 🦇🔊 (@lemiscate) March 4, 2025

A governance post published by Aave Chan Initiative (ACI) founder Marc Zeller on March 4 details the first phase of implementing the Aavenomics update.

Governance Proposal Seeks to Implement Aavenomics Update

The proposal follows the previous update approved in August 2024 and introduces structural changes affecting AAVE holders and liquidity providers.

According to the post, Aave’s market share has increased every quarter for the past two years. The protocol has also built up significant cash reserves, allowing it to finance updates without depending on token-based incentives.

The proposal includes the creation of an Aave Finance Committee (AFC), a governance-backed entity tasked with treasury management and revenue allocation. The AFC would oversee funds held in Aave’s collector contracts and manage liquidity targets.

Aave’s Financial Position and Proposed Adjustments

A key element of the plan introduces Anti-GHO, a non-transferable ERC20 token designed to replace the existing GHO discount model. Anti-GHO would be distributed to AAVE and StkBPT stakers and could be either burned at a 1:1 ratio against GHO debt or converted into StkGHO.

The protocol’s financial reserves have increased since the Aavenomics approval, despite a downturn in interest rates. The proposal states that the protocol maintains dominance in lending revenue, allowing it to fund incentives with stable assets rather than issuing native tokens.

The post notes that competing platforms have limited cash reserves and rely on token-based incentives. Aave’s ability to offer incentives in stable assets, rather than relying on native token emissions, is positioned as an advantage in the current market environment.

A revision to the secondary liquidity incentives is also proposed. The current system allocates approximately $27 million per year toward maintaining secondary market liquidity. The proposal argues that an alternative approach could sustain liquidity while reducing costs.

A buyback and distribution program is also part of the update. Under this model, governance would allocate funds to purchase AAVE on secondary markets. The plan suggests an initial $1 million per week buyback for six months, with adjustments based on treasury reports and overall budget considerations.

Frequently Asked Questions (FAQs):

What is the purpose behind Anti-GHO token adoption?

Stakers will have more freedom with GHO’s discount mechanism given by Aave’s revamping effort through Anti-GHO tokens. Rather than being fixed to a discount system, these tokens can be either burned to lower GHO debt or turned into StkGHO, which makes staking more flexible and could enhance participation.

Who or what is the Aave Finance Committee (AFC)?

The Aave Finance Committee (AFC) will have the responsibility of supervising the treasury, giving strategy to liquidity objectives and budget spendings on security and growth of the protocol. The committee’s consolidation of financial authority is intended to expedite decision making as well as revenue allocation in aid of Aave’s strategic objectives.

In what way does the buyback and distribution program affect the value of AAVE?

Aave’s buyback program aims at lowering the circulating supply of AAVE tokens in the market. As AAVE gets repurchased from the secondary markets, its value may increase due to reduced supply which also benefits long term holders who wish to sell the token.

Why is there any benefit to the change in structure of the secondary liquidity incentive?

The aim is to achieve an equality in liquidity with decreased incentive spending, if not increasing, dependin. The restructuring incentive strategy to liquidity providers is expected to improve capital efficiency and thus help strengthen the protocol’s over.

Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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