AAVE’s core developers have sent the system management keys to the community: users will now guide the future of the protocol.
Aave is the latest project in the field of decentralised finance (DeFi) to transfer governance rights to the holders of its token.
On 29 October, Aave announced that the protocol administration keys have been transferred from its core developers to the governance communities controlled by the holders of its native LEND token utility:
„Today we are facing a historic moment for the Aave Protocol: we have officially handed over the protocol administration keys to the governance, an important step towards decentralisation!
The community voted in favour of the first Aave Improvement Proposal (AIP), which envisaged launching the migration function from the LEND token to the new AAVE governance token at a rate of 100:1, and then transferring the governance rights to the AAVE owners.
The total supply of AAVE is 16 million tokens, 13 million of which are redeemable by LEND holders, while the remaining 3 million have been allocated to an „ecosystem reserve“. In addition to voting AIPs, AAVE holders will be able to staking their tokens to earn a share of the protocol fees, as well as doing the same activity on the AAVE/ETH pair traded in the exchange Balancer, so they can earn BAL tokens along with the trading fees.
AAVEs that are in cold storage or staked can also be used to vote on AIPs.
AAVE was launched in January this year, emerging as one of DeFi’s flagship projects, especially when, in mid-year, the industry began to attract considerable attention. The protocol facilitates the issuance of ‚loan-flashes‘, which are referred to as „the first unsecured loan option in DeFi“.
Liquidity providers pool funds that traders and bot traders can borrow for arbitrage and other profit-generating strategies, provided that the requested transaction can be carried out and the borrowed funds can be returned through transfers executed within a single Ethereum block (ETH), which takes approximately 20 seconds.
A fee of 0.9% is charged on the profits raised through the flash loan, distributed among the lenders in the pool.
Aave is currently the fifth largest DeFi protocol for total blocked value (TVL), with over $980 million invested. However, this value has fallen significantly since last August’s peak of nearly $1.7 billion, a loss of around 42%.