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The Aave Money Market DeFi protocol is now about to be more decentralized than ever. In an announcement published on its official blog on 25th September 2020, the team reported on the successful launch of the Aave Governance on the mainnet.
This means that users of the protocol will now be able to vote on critical decisions for the project’s future. As Aave explains, the governance implementation was active in the Kovan and Ropsten testnets, giving users the ability to experiment with how to participate in the voting process for various improvement proposals, known as AIP.
Bye LEND Welcome AAVE tokens: Aave’s First Proposal
Unlike testnet implementations, the effects of launching governance on the mainnet are now more formal and reflect the commitment of the development team to empowering the community. The first AIP for which users will be able to vote involves a token migration and the total supply reconversion.
Should the first AIP be approved, the LEND tokens will become AAVE tokens, and the total supply will drop by 100:1. While this may give the impression of less liquidity, the reality is that the value or market cap should, in theory, remain the same as the AAVE holdings in the owners’ wallets would also decrease proportionally.
Aave Governance is officially on mainnet, giving the decisional power to the community! Now it’s time to vote on the very first Aave Improvement Proposal (AIP) for the token migration from $LEND to $AAVE.
Thread on how to vote⬇️
Blog post for details: https://t.co/Z09ajBmb2Y
— Aave (@AaveAave) September 25, 2020
“The major benefits of the migration is that we activate the Safety Module, meaning that AAVE token holders can stake their AAVE and earn,” told us Aave CEO, Stani Kulechov.
These modules are created to secure the protocol and would be used to recapitalize the platform in case of a deficit.
Will exchanges support the Lend – Aave migration? According to Kulechov, “Major exchanges will support after the migration is complete; however, they will separately announce on the support.”
More Incentives for the Community
The Aave team also plans to put under consideration the possibility of including part of the fees within these Safety Modules. In this way, it is guaranteed that the security of the protocol increases with its usability.
“The SM will act as a recapitalization mechanism, so in the case of a shortfall event, your stake may be slashed up to 30% to cover the deficit. The idea behind “safety mining” is to reward community members who stake their AAVE to promote the safety of the protocol.
In addition to the Safety Incentives, users would have the opportunity to earn Ecosystem Incentives (EI) for supplying and borrowing assets from within the platform. They hope that the community will also be able to decide how to distribute specific incentives in the near future.
Aave is one of the longest-running DeFi protocols in the ecosystem. It allows users to lend and borrow certain assets, putting others as collateral. However, interests are automatically determined by supply and demand according to parameters coded within the protocol.
Besides, Aave became famous for allowing flash loans. This mode allows a person to take an unsecured loan on the condition that it is repaid before the next block is mined.