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 -4.90% Ethereum / USD ETHUSD $ 3,919.07
-$192.03-4.90% Volume 65.03 b Change -$192.03 Open $3,919.07 Circulating 115.83 m Market Cap 453.94 b 13 h DeFi Protocol, Rari Capital, to Become a DAO After the $10 Million Exploit 16 h SHIB Token Is Sending Ethereum Gas Prices Higher 18 h Deribit Lists Ether at 50k Strike Options with March 2022 Expiry BTC -5.14% Bitcoin / USD BTCUSD $ 55,312.08
-$2,843.04-5.14% Volume 73.17 b Change -$2,843.04 Open $55,312.08 Circulating 18.71 m Market Cap 1.03 t 14 h Swiss Bank UBS Plans Cryptocurrency Offerings to High Networth Clients 15 h Tom Brady, A Seven-Time NFL Super Bowl Champion, Dons Laser Eyes in Support of Bitcoin 18 h Deribit Lists Ether at 50k Strike Options with March 2022 Expiry
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 -6.59% Compound Coin / USD COMPUSD $ 0.00
$0.00-6.59% Volume 3.51 K Change $0.00 Open $0.00 Circulating 53.73 b Market Cap 55.99 K 17 h 1.5 Billion New DAI Minted in The Past Month, Maker Now Earning $400k per day in Revenue 6 d “Institutional FOMO,” Record Volume Seen by Grayscale Ethereum Trust (ETHE) & Ether ETFs 2 w Liquidity Mining Comes to Lending Protocol Aave V2 MKR -8.48% Maker / USD MKRUSD $ 4,896.68
-$415.24-8.48% Volume 415.24 m Change -$415.24 Open $4,896.68 Circulating 995.24 K Market Cap 4.87 b 17 h 1.5 Billion New DAI Minted in The Past Month, Maker Now Earning $400k per day in Revenue 6 d “Institutional FOMO,” Record Volume Seen by Grayscale Ethereum Trust (ETHE) & Ether ETFs 1 w MakerDAO Reports $12.57 Million in Net Income for April
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.