TL;DR

Aave DAO is evaluating a proposal to modify its economic structure, including changes in treasury management and liquidity incentives.
A financial committee would be created to manage reserves and execute a token buyback program of $1 million per week for six months.
The proposal is in the consultation phase, and although the announcement generated interest, AAVE has dropped 0.7% in the last 24 hours, according to CoinMarketCap.

Aave DAO is evaluating a proposal that would modify the protocol’s economic structure. The plan, developed by Aave Chan Initiative (ACI), introduces changes in treasury management, revenue distribution, and the AAVE token buyback mechanism. If the community approves the proposal, the protocol would adjust its liquidity incentives and optimize resource allocation.

What Changes Will Be Proposed in AAVE?

One key point is the creation of the Aave Finance Committee (AFC), which would manage the protocol’s reserves and coordinate financial strategies. Its responsibilities would include executing a buyback program for AAVE, with a budget of $1 million per week for six months. The initiative aims to reduce the number of tokens allocated to liquidity incentives, progressively replacing them with direct market purchases.

The incentive system would also be modified to make resource usage more efficient. Currently, Aave allocates $27 million annually to liquidity incentives. The proposal suggests a model that combines staking and active management, which would lower these costs without affecting the protocol’s competitiveness.

Umbrella and Anti-GHO

Another important change is the implementation of the “Umbrella” security module, designed to mitigate risks associated with bad debt. Additionally, the “Anti-GHO” mechanism would replace the current discount system for the GHO stablecoin. Instead of offering rate reductions, this mechanism would distribute part of the revenue generated by GHO among AAVE stakers.

The plan also includes the definitive removal of the LEND-to-AAVE migration contract. This process, initiated in 2020, left 320,000 unclaimed tokens, equivalent to approximately $65 million. With the contract’s removal, these funds would be reallocated to the ecosystem reserve.

The proposal is currently in the community consultation phase. If it gains sufficient support, it will move to a preliminary vote on Snapshot and then to a formal on-chain governance decision. The market initially reacted positively to the announcement; however, given the ongoing correction phase, CoinMarketCap shows that the AAVE token has dropped 0.7% in the last 24 hours

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Filed under: News - @ March 4, 2025 5:25 pm