AAVE increases by 50% as tokenomics upgrade approaches

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AAVE, the governance token of the Aave Lending Protocol, is up 50% in dollar terms following a proposed “Aavenomics” update, and up 76% from its last hit on July 7.

According to IntoTheBlock, the tokenomics upgrade aims to improve the platform and token value accumulation model.

The proposal suggests removing the safety module, where AAVE participants currently earn inflationary return in exchange for the risk of tokens as capital of last resort.

Instead, a portion of the protocol’s revenue will be redirected to users who stake stablecoins and select assets from the supply side.

This change reduces risk for AAVE token holders and increases growth potential by lowering inflation and using the proceeds as an interim dividend for long-term stable liquidity providers.

IntoTheBlock’s head of research, Lucas Outumuro, pointed out that Aave’s fundamentals are showing significant growth, with total assets provided to its main Ethereum instance close to all-time highs.

Furthermore, the protocol recently launched a custom Aave Lido market, raising $300 million in capital in three days.

Dominating the money market sector

Aave currently dominates the decentralized finance (DeFi) lending market with a 70% share, issuing over $7.4 billion in active loans. This is a substantial increase from the 53% market share a year ago.

In terms of Total Locked Value (TVL), Aave is the third largest DeFi protocol, raising nearly $12 billion in user funds provided as collateral. Additionally, Aave’s TVL is up 80% year-to-date, peaking at over 100% on July 21st.

The protocol’s revenue is also approaching record levels thanks to its fee structure based on loan tranches, with nearly $18 million captured in August, according to TokenTerminal.

Notably, during the early August market rout caused by interest rate hikes in Japan, Aave posted $6 million in revenue after massive liquidations resulted from the price collapse.

The proposed upgrade to tokenomics has sparked renewed optimism that the protocol’s progress will translate into increased value for token holders.

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