Aave Lend Migration and The Likely Effects On Its Market Rating
Aave, a leading decentralized finance (DeFi) protocol, recently launched its governance mainnet platform as it further drives toward total decentralization and community-based governance model. In the same vein, the Aave team unveiled its first-ever Aave Improvement Proposal (AIP) to enable users to vote on the LEND-Aave token migration.
The LEND-Aave token migration is only the first move in the Aavenomics, and it allows users to actively take part in the Aave governance protocol and stake within the system’s safety module.
Before now, AIPs were run externally and a signalling poll was used to survey the sentiment of users on the LEND-Aave migration. Once an AIPs is put out for voting and it receives approval by the community’s governance, the LEND-Aave migration is automatically activated. Unless there is a stipulated deadline as voted by the governance, the migration process proceeds gradually.
The big question is, “what are the likely effects of this token migration?” Let’s have a look.
What is Aave?
Aave is an open-source, ETH-based lending platform that creates a money market where users borrow assets and also earn interests on deposits. Simply said, Aave lets users borrow and lend ETH-based crypto assets at a variable or stable interest rate.
Aave-LEND Migration Protocol - An Overview
Aave’s native token, LEND, was initially issued in 2017 through an Initial Coin Offering (ICO) that garnered $600K in ETH. The initial idea of the LEND token was to offer discounted fees, governance functionality and eventual staking to token holders.
However, after the unveiling and approval of the first AIP, holders are encouraged to partake in LEND-Aave token migration. This migration comes with a brand-new reward mechanism that compensates liquidity providers and incentivizes token holders to stake their assets.
According to CoinTelegraph, Aave will have a maximum of 16 million tokens in supply, with an allocation of 13 million tokens to LEND holders, who can migrate from LEND to AAVE at 100:1. The remaining Aave tokens – 3 million – are held in its ecosystem reserves to reward participants.
The migration protocol was rolled out on the 2nd of October 2020, and at the time of writing, the voluntary migration of LEND to Aave is already over 90.7%. Aave also plans to deploy a credit delegation protocol that allows borrowers and lenders to negotiate and execute credit-based loans via its platform.
Effects of the Aave Lend Migration
1. The exchange ratio of the old token to the new Aave token will be, 1 AAVE to 100 LEND, and the migration will occur at the LEND holder’s pace.
- 87 LEND to 0.87 AAVE
- 400,000 LEND to 4000 AAVE
- 0.3 LEND to 0.002 AAVE
- 100 LEND to 1 AAVE
2. The community gains full control over the migration protocol. Additionally, an Ecosystem Reserve, Safety Module and Safety Incentives are created. The reserves and safety incentives will ensure that investors earn rewards for their participation in staking. A significant shift to decentralized liquidity market protocols is expected in the private lend/borrow sector, with Aave expected to sit at the top of the benefits table.