Lending giant Aave set to launch liquidity mining program

With a liquidity mining program set to launch on Monday, Aave could be on the cusp of becoming the dominant decentralized finance (DeFi) ledning protocol.

Earlier today, Aave Improvement Proposal (AIP) 16 reached quorum, meaning that starting on Monday, 4/26 liquidity providers and borrowers in Aave’s USDC, DAI, USDT, GUSD, ETH, and WBTC pools will earn stAAVE rewards in addition to their standard interest yield.

Per AIP 16, providers and borrowers in these pools will split 2,200 stAAVE tokens per day from the protocol’s current 2.9 million AAVE Ecosystem Reserve, currently worth nearly $1 billion.

The proposal, written by Aave investor Parafi Capital’s Anjan Vinod, notes that the goal of the program is to “drive lending and borrowing activity across markets,” as well as increase the decentralization of the protocol’s governance by distributing governance tokens to more users.

The move is something of a novelty for Aave. The lending platform has consistently been ranked among the largest DeFi protocols, despite not having a liquidity mining program like many of its competitors. Per their respective apps, Compound is currently the top lending protocol with over $15.4 billion in total value locked (TVL) across their markets, while Aave counts $6.8 billion across their Polygon, Ethereum v1, Ethereum v2, and AMM LP token markets.

Aave co-founder Stani Kulechov told Cointelegraph that he expects that the added incentives will bolster the protocol’s TVL significantly.

“The proposal allocates most of the rewards on stablecoins meaning that we will see substantial increase in TVL,” he said.

As the governance proposal notes, the lack of a liquidity mining program has historically put Aave at something of a competitive disadvantage. For instance, at the time of writing money market Compound offers 3.31% yield on stablecoin USDC, along with 2% in COMP governance tokens for a total of 5.51% yield. Aave’s market, meanwhile, also currently offers an identical…

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