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- Aave price is up nearly 5% in the last 24 hours.
- The Merit reward program based on airdrops lures in investors to the Aave ecosystem.
- Merit is aimed at capturing revenue that goes to Morpho Optimizers.
Aave (AAVE) has seen more than 30% growth in total value locked (TVL) from February 17 to March 22 as its Merit reward program is increasingly causing investors to flock to the platform. However, it has tagged, lending pool optimizer Morpho as "unaligned", as competition for revenue heats up.
Aave TVL soars as Merit reward programs attract investors
Aave price recorded gains of nearly 5% in the last 24 hours, as its TVL has risen by 30% since February, according to data from DeFiLlama. This follows the launch of its Merit reward program, which was announced on Tuesday. Considering the potential benefits of earning free airdropped tokens, the program is attracting ETH investors to Aave.
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Merit is a reward program that aims to boost the growth of the Aave ecosystem by rewarding behaviors that benefit the Aave DAO, according to the proposal on the Aave forum.
The recent move by Aave is popular among crypto projects as it's a way to attract massive attention for a project. However, projects often see a huge drop in users after conducting such airdrops. To avoid this, Merit has a twist to its approach.
The budget for the airdrop reward program is worth $5 million, with $2.1 million in wETH and $2.9 million in GHO stablecoin to be distributed over an initial 90 days. The Aave DAO will look at extension proposals in April.
Since it went live on Tuesday, the Merit program has distributed about 280 Wrapped Ethereum (WETH) to borrowers. The next step is to distribute rewards to GHO borrowers and stakers.
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Booster and diluter system aimed at Morpho Optimizers
Merit uses a booster and diluter system to determine users who qualify to receive rewards. While the booster system keeps the points accrued by users private, certain behaviors like staking Aave, holding StkGHO, active governance, using AAVE as collateral, etc., help improve points.
On the flip side, the diluter system will see Merit dilute up to all of a user's rewards if they use non-aligned protocols. The only non-aligned protocol is Morpho Aave Optimizers V2 & V3. The original proposal on the forum stated that it would offer users migrating from Morpho Optimizers boost multipliers.
This follows a post on the Aave forum in which Marc Zeller, founder of ACI, described Morpho optimizers as a "leech on top of the Aave protocol that provides zero benefits and steals potential revenue at the scale of millions per year for negligible yield improvement of users." He stated that Merit helps to protect against such optimizers, as platforms like Morpho by "proxy hurt the Aave protocol revenue."
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Paul Frambot, co-founder of Morpho, quickly responded on X, saying, "The Aave DAO would very likely lose earnings without the efficiency improvements of Optimizer and MORPHO tokens that attract Morpho users and end up benefiting Aave."
As DeFi protocols compete for earnings, the crypto market has shown signs of resuming its bullish momentum following a brief upswing after the Federal Reserve Open Committee (FOMC) meeting. This indicates that the DeFi market may resume its uptrend and attract more users.