The team at Aave, an open-source and non-custodial decentralized finance (DeFi) protocol for earning interest on digital asset deposits while also being able to borrow assets, recently noted that their journey towards “decentralization” continues with the introduction of Aave Governance on mainnet (the production-ready or main network).
The Aave team claims that decentralization is “the Aave ethos.” They state in a blog post that their goal was “always to give the decision [making] power to the community.”
They pointed out that, previously, the Aave governance process was being tested on the Kovan and Ropsten testnets, where users or participants were able to trial or experiment with how voting on Aave Improvement Proposals (AIPs) would work.
The Aave team noted:
“We also had a signalling poll for the token migration proposal, and the voting results were overwhelmingly in favor. Now, it’s time to take it further and vote on the first AIP, this time for real.”
The Aave developers confirmed that voting for the first AIP is currently live. They explained that AIP1 is the proposal that suggests migrating or switching over from the LEND token to the AAVE token, which would make it the Aave ecosystem’s new governance token. LEND and aLEND token holders can begin voting through a dApp (Note: more details available here.)
The Aave team states that if the vote happens to be in favor of the token migration, then the “post-migration AAVE holders will be able to stake their AAVE in a Safety Module (SM) and earn AAVE as a Safety Incentive (SI) in exchange for securing the protocol.” Later on, “a percentage of protocol fees may also be added as a SI if the governance approves.”
The Safety Model or SM will serve as “a recapitalization mechanism,” so in the event or case that there’s a shortfall event, “your stake may be slashed up to 30% to cover the deficit.” The Aave team explained that “the idea behind ‘safety mining’ is to reward community members who stake their AAVE to promote the safety of the protocol.”
The Aave team confirmed on September 25, 2020 that the voting period for AIP1 had already started and will go on “for 5 days, with 1 day of validation to prevent double-voting.” (More details on this process are found here.)
Isa Kivlighan, the Editor of the Aave blog, stated that once the voting period has ended, the results will be shared publicly. Users can take part in the governance forum where they can propose AIPs and hold discussions.
In August 2020, Aave surpassed the $1 billion market cap and the protocol’s second version was released. Also in August, Aave was awarded an electronic money institution license by the UK’s Financial Conduct Authority (FCA).