Aave v2 Introduces Liquidity Mining Program for Stablecoin Borrowers
DeFi platform Aave has rolled out liquidity mining rewards for participants in v2 covenant. Specifically, the platform pays rewards in excess of 20% in the form of governance toekns to those who borrow stablecoins. Users who deposit stablecoins in Aave’s protocol will receive additional returns in the range of 4.78% to 13.49% over normal gains.
The rewards will be paid in the form of staked AAVE (stkAAVE) tokens. Likewise, Wrapped Bitcoin and Ether deposits are generating additional rewards of 4.59% and 2.11%, respectively.
Nevertheless, the biggest rewards in the range of 5.15% to 22.05% seem to be given to borrowers of stablecoin, The liquidity mining program went through a governance vote on April 24, with 2,200 staked AAVE (stkAAVE) tokens, worth about $880,000, kept aside for distribution to lenders and borrowers until July 15. An evaluation of the program will be carried out in July.
Over two-thirds of rewards have been set aside for the USDC and USDT markets, with the rest 32.5% being disbursed among Aave’s DAI, wBTC, ETH and GUSD markets. Aave pointed out:
“AIP 16 increases the liquidity in the Aave Ecosystem Reserve, which can be used to fund grants, devs, and builders through a community-led grants programme.”
AIP-16 received overwhelming ‘yea’ votes from the community and has officially been executed. This proposal, created by @paraficapital, introduces liquidity mining incentives for Aave V2 ⛏️🗳️https://t.co/ewa2Yvlc3w pic.twitter.com/s7xgz21eZ8
— Aave (@AaveAave) April 26, 2021
A big day for @0xPolygon and the whole Ethereum ecosystem!
$1 BILLION in liquidity and 7.2k USERS on a single application, 10 DAYS after the launch! 🤯🔥
Huge thanks to the amazing @AaveAave team and the whole Ethereum community! 🙏
This is just the beginning, stay tuned! 👀 pic.twitter.com/wqvoOLgNbT
— Mihailo Bjelic (@MihailoBjelic) April 24, 2021
Aave stated that the idea behind offering higher reward for stable tokens is to demotivate risky borrowing and increase liquidity of stablecoin.
With about 40% of AAVE’s TVL (total value locked_ in its variant one iteratin, the v2 rewards program is aimed to shift users to the overhauled covenant. Aave issued the following clarification:
“By introducing liquidity mining rewards only on Aave v2, liquidity providers and borrowers will naturally migrate toward the optimized version.”
The program has been introduced after the runaway success of liquidity mining rewards incentivizing platform users to encourage deployment of Polygon (earlier referred to as Matic), the Layer-two scaling solution. A twwet on April 25 indicated that the adoption of Aave’s Polygon had crossed $1 billion in TVL and 7,200 users in a span of ten days following its roll out.
At the time of writing this article, Aave is the sixth-largest DeFi covenant commanding a TVL of about $7.50 billion, as per data provided by DeFi Llama.