Aave Liquidity Mining Program Is Ready to Launch


Key Takeaways

  • Aave’s liquidity mining program will distribute close to $1 million daily, split equally between lenders and borrowers.
  • Most of these rewards will go to stablecoin pools to increase the liquidity of DeFi stablecoins.
  • The platform has already attracted more than $1 billion in liquidity.

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Aave has launched liquidity mining, which will allow lenders and borrowers to receive additional token rewards from the platform.

Incentivizing Participation in DeFi

Aave’s governance community overwhelmingly voted to pass AIP-16, unlocking stkAAVE rewards for liquidity providers on select pools.

These rewards will be given to lenders and borrowers of stablecoins, WBTC, and Ethereum. The lending protocol will distribute 2,200 stkAAVE daily which at the current price of $430 represents close to $1 million in daily incentives divided between lenders and borrowers.

stkAAVE is the staked version of Aave’s governance token giving users access to governance and increasing the liquidity of the protocol’s safety module. This safety module provides a yield in exchange for securing Aave and potentially refunding any hack or bug that might affect the protocol.

There is a cooldown period of 10 days before stkAAVE is unstaked, so distributing it instead of AAVE will incentivize liquidity providers to keep these rewards. By incentivizing participation in its v2, Aave will also encourage users to move their funds from its previous version.

Liquidity Now Above $10 Billion

These liquidity mining rewards are currently attracting a lot of liquidity as more than $1 billion was deposited yesterday on the protocol following the start of the campaign. These incoming funds have taken total liquidity on the protocol above $10 billion.

Daily deposited amount on Aave v2. Data from Nansen.

While the APYs at the moment range between 5% and 15% on stablecoins, this is in addition to any existing APY on the underlying asset. For example, depositing USDT on Aave at the moment would yield 7.74% per year in USDT and 9.58% in Aave rewards.

This is enough to attract liquidity from protocols like Compound or Maker. Yearn Finance’s USDT v2 vault is also already lending money in Aave to farm these rewards.

Disclaimer: The author held ETH, AAVE, and a number of other cryptocurrencies at the time of writing.

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