Aave stands as having made a very important step as a decentralized finance (DeFi) project: it has officially transferred governance rights over to its token holders.
Today marks a historic moment for the Aave Protocol: we have officially handed over the protocol admin keys to the governance, an important step towards decentralisation!
Read more about the Admin Key Handover and what this means for the protocol: https://t.co/89CxKb09rq
— Aave (@AaveAave) October 28, 2020
Taking A New Step For Decentralized Governance
In its latest announcement made on the 29th of October, Aave revealed that the admin keys of the protocol had been transferred. These keys have moved from its core developers to the various governance communities, commanded by individuals holding LEND, its native utility token.
The community had proceeded to vote regarding the fist Aave Improvement Proposal (AIP), voting in favor of it. This will allow migration functionality to be launched between the LEND utility token and the new AAVE governance token, doing so at a ratio of 100 LEND to 1 AAVE. Afterward, governance rights will be transferred to AAVE holders.
A Bit Of Nitty Gritty
The total supply for AAVE stands at 16 million tokens, with 13 million of those being redeemable by way of LEND holders. Three million tokens will be allocated as an “Ecosystem Reserve.” AAVE holders have more benefits than just voting on AIPs, as they’re capable of staking their tokens in order to earn a bit of protocol fees. Balancer allows AAVE holders to stake an AAVE/ETH pairing, earning BAL tokens alongside the trading fees.
AAVE can be used to vote on AIPS, whether it is in cold storage or staked.
Aave’s Success As DeFi Protocol
The Aave DeFi project had launched back in January this year, and came out as one of the sector’s top DeFi projects. The protocol allows the facilitation of issuing “flash-loans,” which stands as one of the first uncollateralized loan options within the DeFi space.
Liquidity providers are capable of pooling funds, which bot operators and traders borrow to perform arbitrage or some other yield generation strategy. Should the required transactions be able to be executed, with the borrowed funds returned, within a setting Ethereum (ETH) block, taking about 20 seconds, the deal is a win. Otherwise, the protocol just reverses the transaction, as if it never happened to begin with.
Aave charges a fee of 0.9% on profits made in these flash loans, which is then distributed among the funders of the pool.
As it stands now, Aave is the fifth-largest DeFi protocol in terms of total value locked (TVL), boasting more than $980 million in staked funds. This is a far cry from the numbers it hit in the August DeFi bubble, where it had almost $1.7 billion in TVL.