• Aave DAO has proposed a series of updates, including a $1M-per-week token buyback program and an Anti-GHO mechanism, to increase AAVE token value and user rewards.
  • The proposal also introduces "Umbrella," a protection system against market downturns, aiming to strengthen Aave’s financial resilience and institutional appeal.

Aave DAO has introduced a proposal aimed at increasing the value of its AAVE token while enhancing benefits for users who stake their holdings.

The proposed updates, which follow an initial approval in August 2024, outline multiple measures designed to improve the protocol’s financial sustainability and user incentives.

The announcement follows a significant financial growth period for Aave. Since mid-2024, the platform’s reserves have increased by 115% to reach $115 million. Additionally, its GHO stablecoin has expanded to a supply of $200 million, generating strong revenues.

One of the key aspects of the proposal is to increase profit-sharing for users who stake AAVE tokens, offering greater incentives for participation in the ecosystem. A new mechanism called Anti-GHO is also included in the plan. This non-tradable token will be funded by half of GHO’s $12 million annual revenue and can be used in two ways: users can either burn it to reduce GHO debt or convert it into staked GHO (StkGHO) for additional rewards.

The proposal also introduces a "buy and distribute" initiative, which aims to stabilize the value of AAVE tokens. The plan involves using $1 million per week to buy AAVE from the open market. If successful, this program could expand further in the next six months.

Another major component of the proposal is "Umbrella," a protective system designed to shield users from financial losses in the event of market downturns.

The DAO's statement on the feature emphasized its significance:

“Aave will be the only protocol able to protect users from bad debt up to billions, as competitors have essentially given up on protecting their users. This unique advantage will make Aave even more attractive, especially for institutions concerned with on-chain risks.”

The proposal is currently open for community feedback, with a formal on-chain vote expected in the coming weeks. If approved, these changes could have long-term implications for Aave’s ecosystem, potentially increasing its attractiveness to both retail and institutional users.

Edited by Harshajit Sarmah