Aave revamp proposal includes revenue redistribution, safety system
Marc Zeller, the visionary behind the Aave Chan Initiative (ACI), revealed an ambitious proposal for a comprehensive overhaul of Aave’s tokenomics on March 4. This initiative introduces a transformative revenue redistribution model, a new “Umbrella” safety system to facilitate protection against bank runs, and the formation of the “Aave Finance Committee” (AFC). Zeller has emphasized the significance of this proposal, branding it as “the most important proposal in Aave’s history” on the social media platform X.
The proposed changes aim to refine Aave’s existing model while ensuring community engagement and approval through governance channels. A standout feature of the new model includes the retention of the prior distribution structure for GHO stakers, part of what Zeller refers to as the “Merit” program, alongside the introduction of a novel non-transferrable ERC-20 token dubbed Anti-GHO. This new token will provide additional value and utility within the ecosystem.
Zeller disclosed that Anti-GHO tokens will be generated by stakeholders of both AAVE and StkBPT, asserting that the Aave decentralized autonomous organization (DAO) has sufficient cash reserves to support both the Merit program and the creation of Anti-GHO tokens. Notably, the cash portion of the Aave DAO has seen a remarkable 115% increase since August 2024, underscoring the protocol’s sustained financial health driven by revenue from loan interest and liquidation fees.
In a bid to further enhance user confidence, the Umbrella safety system has been crafted to shield users from potential bad debt, claiming protection coverage “up to billions.” This innovative safety module aims to mitigate the risks associated with bank runs while ensuring liquidity remains committed within the protocol until a specified cooldown maturity period is reached. By adopting these measures, Zeller believes that Aave can cultivate new product offerings and additional revenue streams.
Moreover, the proposal outlines a token buyback and redistribution strategy. Zeller noted that, while managing Aave’s treasury funds conservatively, the proposal could empower the AFC to initiate an AAVE buyback program immediately, spending up to $1 million per week during the first six months. This plan includes collaborating with market makers to purchase AAVE tokens on secondary markets, with the goal of bolstering the ecosystem reserve and aligning spending with the overall protocol budget.
The broader context of decentralized finance (DeFi) is also noteworthy, as DeFi lending protocols reached a total value locked (TVL) of approximately $39.5 billion, a significant leap from $10.6 billion at the end of 2022. Aave currently leads the lending market with a TVL of $17.5 billion, generating an impressive $8.3 million in fee revenue over the last week alone. January 2025 marked a notable milestone, with Aave hitting $33.4 billion in net deposits, surpassing figures from 2021.
As the DeFi landscape continues to evolve rapidly, various players are entering the space with new offerings. For instance, Uniswap has introduced its Ethereum layer-2 platform, Unichain, designed specifically for DeFi users, while Kraken has launched its own Ethereum L2 called Ink, tapping into the burgeoning market.
As lending protocols enhance their functionality, offering loans on a peer-to-peer basis allows borrowers the flexibility to tailor loan terms, amounts, and interest rates. A growing trend among DeFi protocols is the engagement in buyback initiatives aimed at boosting investor confidence and sharing revenue with stakeholders. Previous examples include Ether.fi’s proposal for ETHFI staker buybacks and Jupiter’s projected annual buybacks exceeding $100 million.
Zeller’s ambitious proposal for Aave’s tokenomics overhaul, if realized, promises not only to bolster the existing ecosystem but also to set a precedent for future innovations in the rapidly advancing DeFi space.
