Aave Raises $3M for Aavenomics Governance Migration

Aave – a sector-leading lending protocol – has closed a $3M round on the back of LEND tokens in lieu of their upcoming Aavenomics upgrade.

Aave looks forward to working with 3 Arrows Capital and @hiFramework on our path toward decentralization, including new tokenomics, protocol governance, and insurance fund staking to bolster the protocol's strength in the event of deficits.

Read more: https://t.co/inLe9XxJDx

— Aave (@AaveAave) July 15, 2020

Positioning themselves as a protocol for money market creation, Aave’s latest round saw $3M worth of contributions from Three Arrows Capital and Framework Ventures when LEND was $0.10 per token. Since then, LEND has soared to over $0.25 per token ahead of an Aavenomics governance upgrade in which LEND will migrate to AAVE with a suite of new protocol incentives.

This comes in tandem with other reputable funds like ParaFi and Spencer Noon’s DTC Capital, both of which have made it public that they also hold significant positions in LEND. DeFi Rate has also received intel that many other prominent DeFi funds have been accumulating positions in LEND, giving good credence to the DeFi token‘s parabolic growth in recent weeks.

It's great to see funds like ParaFi, Framework, and Three Arrows Capital become $LEND investors.

I don't always go to the press because sometimes I prefer to break news myself: @dtccapital is also one of the largest $LEND holders and proud to partner with the @AaveAave team.

— Spencer Noon (@spencernoon) July 15, 2020

Aavenomics Teaser

The raise foreshadows the launch of Aavenomics – a governance upgrade in which the migration to AAVE will introduce new protocol incentives through staking and yield farming. In short, users will stake AAVE as insurance against protocol deficits in return for both AAVE rewards and the vast majority of protocol fees. The staking module is expected to offer both vanilla AAVE staking in tandem with an 80/20 AAVE/WETH Balancer pool. This gives flexibility for those looking to stake with just AAVE while incentivizing those to provide market liquidity to Balancer in exchange for BAL rewards and swap fees.

AAVE staking comes in tandem with yield farming rewarding from protocol usage, similar to COMP and BAL liquidity mining schemas which have driven exponential growth in recent weeks. While the details have yet to be released, we expect users to earn AAVE rewards from lending and borrowing any of Aave’s 20+ supported assets along with special liquidity incentives similar to Synthetix‘s LP rewards.

Distributed Governance

Outside of vast protocol incentives, AAVE governance will distribute key decision making to tokenholders though onchain voting. Using Aave Improvement Proposals (AIPs), AAVE holders will dictate key protocol, market and risk policies for both Aave and different money markets like the Uniswap Money Market. Aave has vocalized that its governance process is meant to stimulate large amounts of discussion before going to an onchain vote, contrary to what we’ve seen so far with Compound and it’s 48-hour window voting periods.

These upgrades will be publicized in a formal Aavenomics governance paper in the next two weeks, kicking off a countdown to Genesis Governance in which LEND tokenholders will be able to vote on the start of AAVE migration in tandem with the proposed incentive allocations mentioned above.

Credit Delegation

Last week, we covered Aave’s proposal for Credit Delegation, essentially letting any two parties enter into undercollateralized lending agreements to use a counterparties capital as collateral to draw a line of credit with aTokens. While the program is set to be largely limited to OTC trading desks and exchanges to start, Credit Delegation is another example of Aave’s continuous innovation in the vibrant DeFi sector.

Aave Continues to Shine

As if it wasn’t clear enough, Aave has solidified itself as a force to be reckoned with in the great crypto landscape. With top firms publicizing their token holdings in tandem with the upcoming Aavenomics, it’s clear that the protocol for money market creation has a very bright future lined up for the coming months.

1/ Often times in a product category, the incumbent launches, proves the market, and leaves space for a second mover to take share through innovation, rapid iteration, and a community driven style of management

Coinbase/Binance, Uber/Lyft, MKR/SNX, and now,

COMP/@AaveAave

— Vance Spencer (@iam__vance) July 15, 2020

It’ll be interesting to see how the lending wars pan out, with protocols like Aave, Compound and bZx fighting for TVL in a rapidly growing sector full of strong incentives.

If one thing is for sure, DeFi Rate plans to play a big role in Aave governance and will be introducing a formal protocol bid upon the launch of Genesis Governance in a few week’s time.

To stay up with Aave, be sure to follow them on Twitter or join the conversation on Discord.

Cooper Turley

Cooper is the Editor of DeFi Rate and a contributor to leading DeFi outlets like the Defiant and Bankless. He is active in the DAO ecosystem through projects like MetaCartel and Raid Guild where he seeks to incubate governance models and grassroots community development. He is an ambassador of Set Protocol and the Director of Fitzner Blockchain Consulting where he authors a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.