A three-minute brief introduction to the new token economic model of Aave, a popular DeFi project

On July 30, AAVE officially announced the AAVENOMICS proposal, which will change the TOKEN model. The actual additional issuance is 23.08%. This additional issuance will be used for the ecological security and development of AAVE. With the implementation of the new TOKEN model, AAVE will soon compete with COMP in the Central Plains and compete for the crown of the DeFi lending market. The content of this proposal is described in detail below

1. The total amount of AAVE is 16 million, of which 13 million AAVE is exchanged for 100 LEND to 1 AAVE, and 3 million AAVE is the additional issuance, with an actual issuance rate of 23.08%. The additional issuance of 3 million is reserved for the development and protection of the AAVE ecology.

Explanation: The additional issuance of AAVE is imminent. LEND has been fully circulated and cannot be used for security and incentives. In this way, there is no way to directly confront COMP and compete for the position of the leader in the DeFi lending market. The additional issuance of 23.08% this time is definitely a manifestation of the team's wisdom. If there are too many additional issuances, it will damage the interests of LEND holders and affect the stability of the market value. 23.08% is a reflection of the team's restraint. At the same time, it does the opposite of DOT and reduces the size of tokens. The author believes that it is inspired by YFI and MKR. The most appropriate comparison with the large market value and high price is undoubtedly Moutai.

2. Part of the additional issuance of 3 million is used for the construction of security pools, incentives for lending ecology, protocol voting governance, and protocol upgrades.

3. AAVE's security pool mode

Detailed explanation: AAVE will have a security pool that accepts AAVE and 80% AAVE/20% ETH for pledge. Once a risk occurs, the pledge pledged in the pool will bear the risk. At the same time, you will enjoy triple benefits. The first AAVE reward, the second AAVE protocol fee reward, and the third AAVE will establish a pool in BAL, 20% ETH/80% AAVE, you can get BAL rewards. AAVE has creatively built its own security module, which can earn benefits while taking risks, which is very creative. When the security pool is insufficient, AAVE may conduct an auction like MKR to make up for the risk gap.

4. AAVE's incentives for lending

Detailed explanation: AAVE will provide AAVE token incentives to borrowers and lenders on AAVE like COMP. At the same time, AAVE will reward some programs built on AAVE. It is very likely that, like SNX, there will be special AAVE rewards for contracts like YEARN, and the amount of incentives for AAVE lenders and incentives for other projects will be determined by AAVE holders' votes

5. AAVE’s Voting Protocol Governance

Detailed explanation: Voting governance is more about preparing for the transition to DAO. After MKR, KNC and SNX, AAVE will also run wildly on the road of community governance, which can be well exempted from legal constraints. We can also get confirmation from AAVE's Roadmap.