Aave is moving forward with a major update to its tokenomics. Founder of the ACI, Marc Zeller, posted an Aave Request for Comment (ARFC) proposal on Tuesday. This marks the first phase of the “Aavenomics” update, focusing on its tokenomics, revenue redistribution, liquidity management, and the deprecation of LEND.
The proposal follows the Aavenomics temp check, approved in Aug. 2024. The network plans to introduce a fee switch to return excess revenue to key users. This could also pave the way for the protocol restaking in the future, creating new revenue streams.
Its market position has strengthened significantly. Its cash reserves have grown 115% to $115 million since the temp check. This financial stability allows the network to proceed with the Aavenomics update while maintaining its competitive edge.
A crucial part of the plan is the formation of an Aave Finance Committee (AFC). This committee will manage treasury holdings and oversee liquidity strategies. The AFC will also run a $1 million per week AAVE buyback program for six months. The program’s scale may increase based on Aave’s financial health.
The network is also working on optimizing secondary liquidity incentives. The current system costs $27 million annually. The update aims to cut costs by combining staking and active management. Instead of distributing rewards, it will gradually shift to buying back AAVE from the market.
Aave enhances security with Umbrella safety module
Security improvements are part of the proposal as well. The network’s new Umbrella safety module will offer stronger protection against bad debt, reportedly covering amounts in the billions. Another key change is the introduction of Anti-GHO, a new fee switch mechanism. It will redistribute a portion of GHO stablecoin revenue to AAVE stakers, replacing the current GHO discount system.
The proposal also seeks to formally deprecate the LEND-to-AAVE migration contract. This move would reclaim 320,000 unclaimed AAVE tokens, worth around $65 million, for Aave’s ecosystem reserve. LEND was its original governance token before it transitioned to AAVE in 2020.
Next, its community will provide feedback to reach a consensus. If approved, the proposal will move to an off-chain Snapshot vote. After that, it will proceed to a formal on-chain governance proposal (AIP) before execution.
