Decentralized Governance: DeFi Platform Aave to Migrate Ownership of Protocol to the Governance of Smart Contracts

The developers of 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, noted that it wasn’t too long ago that the Aave governance protocol went live on the Ethereum mainnet.

The Aave team confirms that they’ve allowed LEND (Aave’s native token) holders to take care of governance-related decisions for the DeFi protocol. Aave’s developers also noted that the vote for the first Aave Improvement Proposal (AIP) has now taken place. LEND token holders voted for the LEND token “to migrate to the AAVE token at a rate of 100:1, effectively jumpstarting the Aavenomics.”

Isa Kivlighan from London-headquartered Aave writes in a blog post that the migration “is in effect, and the AAVE token is the new governance token of the protocol.”

Kivlighan, the digital market manager at Aaave, confirms that AAVE token holders are now able to vote on AIPs (which are proposals for performing updates or changes to the DeFi protocol). She also mentions that token holders are now able to stake their AAVE in the protocol Safety Module and start earning “Safety Incentives in exchange for securing the protocol.”

Kivlighan added:

“The first governance voting went smoothly, and there have been many proposals, discussions, and more in our governance forum — it is clear that the Aave community is full of great ideas and is keen to actively participate in the future of the protocol….Aave launched back in January 2020, and since then, the Aave team maintained control of the admin keys in case any issues came up. We wanted to battle test the protocol, ensuring that the governance was only released when it was truly ready. …. we take security very seriously, and our top priority is the safety of Aave users.”

Kivlighan explained that the Aave protocol has been developed in a manner that’s non-custodial, so that users are able to maintain full control over their assets. But in the  “true spirit of decentralization, we want the community to have full control over the protocol as well,” Kivlighan claims.

She also mentioned that now that Aave’s governance has been “released, tried, and tested, it is time to migrate the ownership of the Aave Protocol to the governance smart contracts.”

This will be achieved by completing the following steps:

  • Set the Aave Governance contract as Lending Pool Manager which is “the entity enabled to change parameters on the protocol contracts (LTVs, thresholds, enable/disable as borrowing/collateral, etc.) and list new assets”
  • “Give the ownership of the LendingPoolAddressProvider contract to the Aave Governance. The LendingPoolAddressProvider is the factory contract that deploys all the core pieces of the system and can update them, factually having full control over the protocol.”
  • “Give the ownership of the TokenDistributor contract to the Aave Governance. This contract receives all the protocol fees and manages their distribution.”

As reported earlier this month, Aave introduced Centrifuge, a platform for launching real-world assets.

More than $3.5 billion in value had been deposited on the Aave platform and over $1 billion had been borrowed (as of September 2020).

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