AAVE soars 50% as tokenomics upgrade nears

Key Takeaways

• AAVE proposes eliminating the safety module and redirecting protocol revenue to stablecoin stakers.
• Aave currently holds a 70% market share in DeFi lending, with $7.4 billion in active loans.

AAVE, the governance token of the Aave lending protocol, has surged 50% in dollar terms following a proposed “Aavenomics” update, and 76% since its recent bottom registered on July 7.

According to IntoTheBlock, the tokenomics upgrade aims to improve the platform and the token’s value accrual model.

The proposal suggests eliminating the safety module, where AAVE stakers currently earn inflationary yield in exchange for risking their tokens as last resort capital.

Instead, a portion of the protocol’s revenue will be redirected to users staking stablecoins and select assets on the supply side.

This change reduces risk for AAVE token holders and increases upside potential by decreasing inflation and using revenues as a proxy dividend for long-term stablecoin liquidity providers.

IntoTheBlock’s Head of Research Lucas Outumuro highlighted that Aave’s fundamentals show significant growth, with the total assets supplied to its Ethereum mainnet instance near all-time highs.

Moreover, the protocol recently launched a custom Aave Lido market, attracting $300 million in capital within three days.

Dominating the money market sector

Aave currently dominates the decentralized finance (DeFi) lending market with a 70% share, issuing over $7.4 billion in active loans. This represents a substantial increase from the 53% market share a year ago.

Regarding total value locked (TVL), Aave is the third largest DeFi protocol, amassing nearly $12 billion in users’ funds provided as collateral. Additionally, Aave’s TVL showed an 80% year-to-date increase, peaking at over 100% growth on July 21.

The protocol’s revenues are also approaching record levels due to its fee structure based on loan portions, with nearly $18 million captured in August, according to TokenTerminal.

Notably, during the early August market dump caused by the interest rate hikes in Japan, Aave registered $6 million in revenue after massive liquidations resulted from price crashes.

The proposed tokenomics update has sparked renewed optimism that the protocol’s progress will translate into increased value for token holders.