Aave has quickly become a flagship product in Ethereum’s DeFi ecosystem. The decentralized money-market, where users can trustlessly borrow and lend crypto-assets like stablecoins, currently has over $1 billion worth of value locked in its contracts. Per DeFi Pulse, it is the third-biggest Ethereum protocol by total locked value.
While a flagship product in decentralized finance, the protocol is not entirely decentralized.
Governance of the protocol, meaning the direction it moves in, has largely been dictated by the organization behind the deployment of the protocol. Of course, users could voice their opinions online if they wanted something change, but there has been no formal governance structure to allow retail users to participate.
This is changing, though, with the introduction of “Aavenomics,” where the protocol’s native Ethereum-based token, LEND, will be swapped for a new token called AAVE that will help govern the protocol.
It was recently revealed that Aavenomics is now being rolled out, with it falling on the community if this upgrade should be released now or later.
Aavenomics is being rolled out, bolstering a top Ethereum DeFi protocol
According to an announcement by the Aave team on Sep. 25, “Aave Governance is officially on mainnet, giving the decisional power to the community!” This comes after a period of governance on the Ropsten and Kovan testnets, which proved successful.
The first proposal is to activate Aavenomics, “making it the new governance token of the Aave Ecosystem.” This will give users the opportunity to trade LEND for AAVE at a 100:1 ratio, giving the cryptocurrency a price closer to that of many other tokens in the DeFi ecosystem.
The launch of $AAVE is officially in the hands of the community as AIP1 is now live 🎉
Buckle up! This is all happening in a matter of days.
— Spencer Noon (@spencernoon) September 25, 2020
Should the community agree on AIP1, which outlines this migration, a new system called “Safety Mining” will be activated. The module will allow users to “earn AAVE as a Safety Incentive (SI) in exchange for securing the protocol.” This effectively marks Aave’s first foray into yield farming despite it already being the third-largest DeFi protocol.
The vote has already swung well in favor of the activation of this upgrade.
100% of the 55,000,000 votes thus far are “yae,” nearly reaching the 65 million quorum threshold.
LEND reacts positively to the development
LEND has reacted positively to the development. Per CryptoSlate market data, the coin is up nearly 10 percent in the past 24 hours, outperforming Bitcoin’s relatively mild one percent gain.
On the day Aavenomics was announced, the coin surged in excess of 20 percent as the market saw this as a strong step forward for the DeFi coin.
Presumably, the activation of Aavenomics should drive LEND, then AAVE further to the upside, barring a drop in the price of Bitcoin or Ethereum anyway.
Chart of LEND’s price action over the past day. Chart from TradingView.com