Aave (AAVE) Considers 'Fee Switch' to Benefit Token holders; Uniswap Plans Similar Move
Summary:
Decentralized lending platform Aave (AAVE) is considering implementing a 'fee switch' to distribute transaction fees to its token holders, as revealed by Aave Chan Initiative founder Marc Zeller. If enacted, this will allow governance to control and adjust fee-related policies, based on the platform's needs, following the lead of Frax Finance. Concurrently, discussions are ongoing about Dai (DAI) collateral restrictions and loan-to-value ratios. This news comes ahead of Uniswap UNI's own proposed 'fee switch', set for mid-April.
Aave (AAVE), the decentralized lending platform, is contemplating a plan to activate a 'fee switch' that provides fees to token holders. Founding member of the Aave Chan Initiative, Marc Zeller, disclosed this on X social platform. He suggested flipping the 'fee switch' in a week, after pointing out that around $60 million a year is the net profit generated by the Aave decentralized autonomous organization (DAO), a sum that would cover five years' worth of operational expenditure.
Aave, a multi-blockchain-run crypto lending platform, offers the service of loaning one cryptocurrency whilst another is kept as security, and its governance is carried out by the Aave token holders who together make up the AaveDAO.
Previously on the X social platform, Zeller implied that a fee might be levied on Aave stakers, he wrote on March 16: "A suggestion for a new version of the safety module will include distributing fees to stakers."
The term 'fee switch' usually relates to an inbuilt system or platform process which toggles on or off certain charges or fees. This feature, in decentralized finance (DeFi) protocols like Aave, might sanction fees gathered from transactions or other operations to be distributed among tokenholders or members of the protocol.
Aave DAO has recently approved modifications to stakeholder fees for its GHO stablecoin to keep the token's peg steady. If the Aave DAO goes ahead with triggering the fee switch, it will follow the lead of Frax Finance, where a proposal to re-establish its fee switch was endorsed recently.
Nonetheless, on April 5, AaveDAO debated restrictions on Dai (DAI) collateral. Representatives from Chaos Labs, a risk management firm, pushed forward a new proposal recommending a 12% reduction in Dai loan-to-value ratios, opposing Marc Zeller's 75% reduction suggestion.
Previous to these discussions, Ave had proposed assigning a loan-to-value ratio (LTV) to DAI of zero percent across all Ave deployments. The proposal also advised removing sDAI incentives from the Merit program from the second round of Merit onwards. This proposal is a direct response to MakerDAO's speedy D3M project, which in just under a month, raised the DAI credit line to almost 600M DAI.
Meanwhile, the decentralized exchange platform Uniswap UNI, is gearing up for its own fee switch proposal due in mid-April after successfully passing a temperature check.
Published At
4/7/2024 11:06:41 AM
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