Aave Chan Initiative (ACI)

Founder Marc Zeller has made what he calls “the most important proposal in Aave history,” causing the price of AAVE to surge.

The proposal, submitted today as an Aave Request for Comments (ARFC), marks the first phase of the “Aavenomics” update. Its goals include:

• Improve AAVE tokenomics
• Redistribute excess protocol revenue
• Optimize secondary liquidity incentives
• Formally deprecate LEND

> “After half a decade of hard work with ACI, we are proud to present the updated Aavenomics proposal for the Aave DAO,” Zeller stated on X. “We see this as the most important proposal in our history. Feel free to read it and provide feedback.”

ACI acts as a governance delegate and service provider within the Aave DAO, overseeing proposal creation and strategic development for the Aave protocol. The proposed changes pave the way for a potential fee change that would return excess net revenue to key users of the platform, following approval of the Aavenomics QA in August 2024.

Aave has significantly strengthened its market position since the August vote, with cash reserves increasing by 115% to $115 million. Zeller indicated that this financial stability allows Aave to continue updating Aavenomics while maintaining competitiveness in the decentralized finance (DeFi) space.

A key component of the proposal is the creation of an Aave Finance Committee (AFC), which will manage Aave’s treasury assets and liquidity strategies. The AFC will oversee a $1 million per week AAVE buyback program for six months, with the possibility of scaling the initiative through a follow-on offering based on the protocol’s financial health.

The Aavenomics update aims to reduce Aave’s current $27 million annual liquidity costs while enhancing secondary liquidity incentives. The new system will integrate staking with active liquidity management, shifting AAVE toward market buybacks instead of distribution as rewards.

Another major upgrade includes the introduction of the Umbrella security module, designed to protect users from bad debts “running into the billions.” The proposal also introduces Anti-GHO, a fee-shifting mechanism reallocating a portion of GHO stablecoin revenue to AAVE stakers, replacing the existing GHO rebate system.

Additionally, the proposal aims to formally retire the LEND-to-AAVE migration contract and reclaim 320,000 unowned AAVE tokens worth approximately $65 million for the ecosystem reserve. LEND was Aave’s original governance and utility token before its upgrade to AAVE in 2020.

The proposal is entering a community feedback phase aimed at reaching consensus before moving to an off-chain Snapshot vote. If approved, it will proceed to a formal on-chain governance proposal (AIP) for final implementation.

*This is not investment advice.