Mining crypto

Aave Revamps LEND Token Economy: Adds Staking and Liquidity Mining

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Aave is overhauling its token economy by adding liquidity mining and staking to its protocol. The change is intended to help LEND holders capture more of the protocol’s growth.

Align Aave with LEND

One of DeFi’s most widely used protocols, Aave, is set to undergo a complete overhaul of its token economy. The project’s current token, LEND, is not closely aligned to capture protocol growth.

Currently, there is no additional reward for holding LEND for users. To provide more value to holders, the project is migrating the LEND token to the AAVE token at a rate of 100 to 1. The current supply of 1.3 billion tokens will increase to 13 million.

An additional three million tokens will be created and sent to an ecosystem reserve to fund protocol incentives.

Aave will introduce two new incentives: liquidity mining for users and staking rewards for those who lock their AAVE tokens in the system. The reason for liquidity mining is the same as Compound, Balancer or any other protocol that has implemented it – a cheap way to subsidize its use.

Staking, however, is something new. The staked tokens will act as a guarantee of last resort in the event of a shortfall. The backstop is similar to the protocol deficit encountered by Maker earlier this year, at which the Maker Foundation announced a new MKR issuance round. Instead of issuing new tokens, Aave incentivizes people to help secure the protocol with staking yield.

A governance proposal regarding annual incentives is being discussed on Aave’s governance forum. The core team’s initial draft suggests 685 AAVEs per day (250,000 per year) each for liquidity mining and staking.

LEND prices are up 15% since the announcement. Source: CoinGecko

Aave’s token economic overhaul has been in the works for a few months now, and LEND’s price has risen 15% since the announcement.

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