Aave, a DeFi lending giant, is set to launch a liquidity-mining program. The program is set to help the firm surpass Compound in terms of reach and revenues.
Aave is planning to launch a liquidity mining program on April 26. This feature will enable the firm to become a popular decentralized finance (DeFi) protocol. This program will also help it rank ahead of other protocols such as Compound and MakerDAO.
On Saturday, Aave had attained the required quorum on the Aave Improvement Proposal (AIP), which means that from Monday, four liquidity providers on the protocol on DAI, ETH, GUSD, UDSC, USDT, and WTBC pools will receive stAAVE rewards. The borrowers will also earn a standard interest yield.
Aave’s Improvement proposal
According to the proposals provided under AIP 16, liquidity providers and borrowers on the selected pools will share 2200 stAAVE tokens daily between themselves. These rewards will come from the 2.9 million reserves for the firm with a valuation of almost $1 million.
The recommendations on the proposal were written by Anjan Vinod, one of the investors of Aave and an executive of Parafi Capital. According to Vinod, the purpose of the proposal will be to boost lending and borrowing in different markets and increase issue governance tokens to users. These tokens will decentralize the firm’s governance by giving some users control over the firm’s future.
Enhancing its competitiveness
The launch will be very significant to Aave, given that the firm does not have a liquidity mining program like its competitors. Not having a liquidity mining program has slowed down Aave’s competitiveness. However, even with this limitation, the lending platform has still been ranked among the top DeFi lending platforms.
The biggest competitor of Aave is Compound, which is the most extensive DeFi protocol with a Total Locked Value (TVL) of more than $15.4 billion. On the other hand, Aave has $6.8 billion across different tokens, including Ethereum v1, Ethereum v2, Polygon, and AMM LP tokens. The launch of the new program is expected to increase Aave’s TVL, as it will issue rewards in stablecoins.
The firm’s current mining program will end in mid-July 2021, but it will pave the way for expanding the liquidity mining for the firm in the future. According to Vinod, launching the liquidity mining program is done as a test to identify whether liquidity mining will be beneficial to Aave’s ecosystem. While a significant percentage of Aave’s community did not support the proposals initially, this is expected to change when they see its positive effects.