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DeFi lending protocol Aave has begun its token migration and supply cut following a governance vote which was virtually all in favor. The new token has been trading at a premium against the old one.

Aave initially updated its ‘tokenomics’ roadmap in July when it proposed to cut the supply by a hundred times and convert existing LEND tokens into AAVE tokens.

The vote was passed at the end of September and the migration started shortly after. The LEND supply is getting constricted, with every 100 LEND tokens being converted into one AAVE.

The migration aims to align token holders’ incentives with the protocol’s interests, involving protection against shortfall events while rewarding holders with staking opportunities

Part of the upgrade and migration includes the Aave Safety Module (SM) which enables staking rewards of up to 11% per year. New AAVE tokens held in the SM acts as a reserve protecting the protocol from unexpected losses, smart contract risk, or oracle failure according to the latest Defiant newsletter.

The new incentive does not come without risk however as stakers risk up to 30% of their assets being locked in the SM getting ‘slashed’ if there was a shortfall event, the report added. This will not happen during the initial phases of the migration though, in order to encourage liquidity provision.