Liquidity Mining Comes to Lending Protocol Aave V2
This latest feature in Aave, which currently accounts for 17% of the crypto lending sector with Compound in the lead with 53% share followed by MakerDAO at 30%, could be expected to “kickstart DeFi Summer 2.0.”
Liquidity mining is officially coming to lending protocol AAVE as Aave Improvement Proposal 16 gets passed with 62% support.
Introduced last week, the AIP introduces liquidity mining rewards for Aave V2. As per this proposal, 2,200 Staked AAVE (stkAAVE) will be distributed per day, representing around $1 million in rewards distributed daily to lenders and borrowers.
stkAAVE are rewarded instead of AAVE in order to align long-term incentives, disincentivize speculative farmers, and allow users to earn an underlying yield on top of the AAVE they earn.
According to the proposal, this will give LPs more governance weight up front and secure the protocol by increasing the amount of AAVE staked in the Safety Module.
These rewards will be allocated on a pro-rata basis across the markets based on the dollar value of the borrowing activity in the underlying market.
Estimated APR is, for DAI 12.67% – 37.6% on supply and borrowing respectively, on USDT 14.25% – 41.7%, on USDC 15.87% – 43.2%, on ETH 5.65% – 1.65%, and on BTC 6.25% – 1.85% ETH 1.27% Ethereum / USD ETHUSD $ 1,782.09
$22.631.27% Volume 11.12 b Change $22.63 Open $1,782.09 Circulating 120.97 m Market Cap 215.57 b 4 mon Coinbase Predicts Substantial Growth of Newer L1 Chains & Institutionalization of Regulated DeFi 4 mon A Possible Crypto Recovery Moving Into New Year, Risk-on Sentiments Send The Stock Market to Another Record High 4 mon The Sandbox Game Is Migrating to Ethereum Sidechain Polygon and Launching A DAO in 2022 BTC 0.59% Bitcoin / USD BTCUSD $ 29,016.28
$171.200.59% Volume 17.15 b Change $171.20 Open $29,016.28 Circulating 19.05 m Market Cap 552.83 b 4 mon SEC Commissioner says NFTs Might Fall Within Their Jurisdiction, Gensler Hires Senate Aid for Crypto Policy 4 mon A Possible Crypto Recovery Moving Into New Year, Risk-on Sentiments Send The Stock Market to Another Record High 4 mon Bitcoin and Ether Dump More Going Into Year-End, ETH Killers Showing Great Momentum
The motivation behind introducing liquidity mining rewards is to grow lending and borrowing activity in targeted markets, now that almost every major DeFi protocol is launching a liquidity mining program.
Rewarding AAVE to users also leads to broader distribution and protocol decentralization, ti said.
I can't think of a single fintech startup that has reached the scale of DeFi protocols in the same time & capital raised
Many DeFi protocols are <5 years old, generating at least $100M in revenue, profitable, w/ small teams & global expanding communities
* Note: just a sample👇 pic.twitter.com/i4QT3gC3NP
— SantΞago R Santos (@santiagoroel) April 26, 2021
In response to this, the price of AAVE surged more than 20% to $387. The $4.86 billion market cap coin is currently up 330% YTD.
According to some, this AIP could turn out to be “monumental” for DeFi and very well be the “catalyst to kickstart DeFi Summer 2.0,” just like Compound Finance’s liquidity did the original DeFi summer.
“This comes together to form a reasonable narrative for why ETH-based DeFi apps are due a re-rating,” said Wangarian, Capital allocator at DeFiance Capital.
Aave currently accounts for 17% of the lending sector in the crypto market, with Compound in the lead, having captured 53% of the market share, followed by 30% by MakerDAO. COMP 0.00% Compound Coin / USD COMPUSD $ 0.00
$0.000.00% Volume 0 Change $0.00 Open $0.00 Circulating 53.73 b Market Cap 2.59 K 6 mon Australia's Largest Bank to Allow its 6.5 Million Users to Buy, Sell, & Hold 10 Cryptocurrencies via its App 7 mon Compound Bug Puts 490k COMP at Risk to Become the Largest Fund Loss in a Smart Contract Incident 7 mon Grayscale Makes Solana (SOL) the 4th Biggest Holding in its Digital Large Cap Fund, Adds Uniswap (UNI) too MKR 2.54% Maker / USD MKRUSD $ 1,191.46
$30.262.54% Volume 111.63 m Change $30.26 Open $1,191.46 Circulating 977.63 K Market Cap 1.16 b 4 mon StarkWare Proposes to Deploy Aave on its ZK-Rollup L2 StarkNet 6 mon Big Week Ahead? Bitcoin Rallies Towards ATH, Ether Sets A New High, Crypto Marks Hits $3 Trillion 6 mon Grayscale Adds Avalanche (AVAX) and Terra (LUNA) to its Investment Product Consideration List
The number of outstanding loans has reached ATH of ~ $10b across Aave, Compound, and MakerDAO.
The lending sector went parabolic during Q1 2021, with DeFi’s most popular lending platforms reaching the highest ever $25 billion.