Aave Chan Initiative (ACI) founder Marc Zeller has made what he calls “the most important proposal in Aave history,” causing the price of AAVE to surge.
Chart showing the rise in AAVE price.
The proposal, submitted today as an Aave Request for Comments (ARFC), marks the first phase of the “Aavenomics” update, which aims to improve AAVE tokenomics, redistribute excess protocol revenue, optimize secondary liquidity incentives, and formally deprecate LEND.
“After half a decade of hard work with ACI, we are proud to present the updated Aavenomics proposal for the Aave DAO,” Zeller said in a statement over X. “We see this as the most important proposal in our history, feel free to read it and provide feedback.”
ACI serves as a governance delegate and service provider within the Aave DAO, overseeing proposal creation and strategic development for the Aave protocol. The newly proposed changes pave the way for a potential fee change to return excess net revenue to key users of the platform following approval of the Aavenomics QA in August 2024.
Aave’s market position has strengthened significantly since the August vote, with cash reserves increasing by 115% to $115 million. Zeller said this financial stability allows Aave to continue updating Aavenomics while remaining competitive in the decentralized finance (DeFi) space.
A key component of the proposal is the creation of an Aave Finance Committee (AFC) that will manage Aave’s treasury assets and liquidity strategies. The AFC will oversee a $1 million per week AAVE buyback program for six months, with the possibility of scaling the initiative through a follow-on offering depending on the protocol’s financial health.
The Aavenomics update aims to reduce Aave’s current $27 million annual liquidity costs while improving secondary liquidity incentives. The new system will integrate staking with active liquidity management, shifting AAVE toward buying back from the market rather than distributing it as rewards.
Another major upgrade includes the introduction of the Umbrella security module, designed to protect users from bad debts “running into the billions.” The proposal also introduces Anti-GHO, a new fee-shifting mechanism that reallocates a portion of GHO stablecoin revenue to AAVE stakers, replacing the current GHO rebate system.
The proposal also aims to formally retire the LEND-to-AAVE migration contract and reclaim 320,000 unowned AAVE tokens worth approximately $65 million for the ecosystem reserve. LEND was the original governance and utility token of Aave before it was upgraded to AAVE in 2020.
The proposal is now entering a community feedback phase that aims to reach consensus before moving to an off-chain Snapshot vote. If approved, it will move on to a formal on-chain governance proposal (AIP) for final implementation.
*This is not investment advice.
