Aave Chan Initiative founder Marc Zeller posted an Aave Request for Comment (ARFC) proposal on Tuesday, seeking approval on the first phase of the "Aavenomics" update, focusing on AAVE tokenomics improvements, protocol excess revenue redistribution, secondary liquidity protocol management and the deprecation of LEND.
"After half a decade of hard work, with the ACI, we're proud to present the updated Aavenomics proposal to the Aave DAO," Zeller said on X. "We consider it the most important proposal in our history, feel free to have a read and provide feedback."
ACI is a delegate and service provider within the Aave DAO, responsible for governance participation, proposal creation and strategic development of the Aave protocol.
It follows the Aavenomics temp check, which was approved in August 2024, in a move that could lead the DeFi lending platform to adopt a fee switch to return some of the platform's net excess revenue to its key users. The proposal could set the stage for potential Aave protocol restaking in the future, creating new revenue streams, Zeller stated at the time.
Aave's growing market dominance and its cash reserves increasing 115% to $115 million since the temp check now puts it in a comfortable position to initiate the Aavenomics update while remaining competitive, Zeller said.
A key component of the proposal is the creation of an Aave Finance Committee (AFC), tasked with managing Aave's treasury holdings and liquidity strategies. The AFC will oversee a $1 million per week AAVE buyback program for six months, with plans to scale the program based on the protocol's financial health via a subsequent proposal.
Additionally, Aave's secondary liquidity incentives would be optimized, aiming to reduce its $27 million annual liquidity costs by using a more efficient system that combines staking and active management while gradually shifting to buying back AAVE from the market instead of giving it away in rewards.
Aave's new Umbrella safety module would also be capable of protecting users from bad debt "up to billions." Another major change introduced in this proposal is the implementation of Anti-GHO, a new fee switch mechanism that redistributes a portion of GHO stablecoin revenue to AAVE stakers that replaces the current GHO discount system.
Furthermore, the proposal would formally deprecate the LEND-to-AAVE migration contract, reclaiming 320,000 unclaimed AAVE tokens worth around $65 million for its ecosystem reserve. LEND was the original governance and utility token of Aave before it was upgraded to AAVE in 2020.
The next steps include gathering community feedback with the goal of reaching consensus before moving to an off-chain Snapshot vote. If approved, it would then proceed to a formal on-chain governance proposal (AIP) before final execution.
Aave's native token jumped 7.8% from $174.10 to $187.71 following Zeller's announcement of the proposal, according to The Block's AAVE Price page.
AAVE/USD Price Chart. Image: The Block/TradingView.
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