Extend Liquidity Incentives for Aave v2

Liquidity Mining Extension

Given the liquidity mining program will end this week, this AIP will extend the current program by 4 weeks. This extension should give the community enough time to debate any changes to the liquidity mining program without any interruption for Aave borrowers and lenders.

The same stkAAVE distribution will be used.

Liquidity Mining v1

Liquidity mining incentives were introduced for Aave v2 on 4/26/21.

2,200 stkAAVE per day will be allocated pro-rata across supported markets based on the dollar value of the borrowing activity in the underlying market. stkAAVE was distributed over AAVE to further align users with the Aave Protocol and increase the amount of AAVE staked in the safety module.

Liquidity Mining Recap

• Value Distributed: During the liquidity mining campaign, 198,000 stkAAVE will be distributed to borrowers and lenders on Aave v2, using ~7% of the Ecosystem Reserve. This equates to $82MM in rewards (AAVE VWAP since LM program started).

• TVL: v2 TVL rose from $7.8 billion to a high of $14.4 billion in mid-May. Stablecoin liquidity accounts for more than 60% of total Aave v2 liquidity.

• V1 to V2 liquidity migration: v1 liquidity decreased from $2.5 billion to $372MM since the liquidity mining program started. 40% of Aave liquidity was deployed in v1 before the LM rewards started. Aave v1 liquidity now accounts for less than 3% of all liquidity on Aave. This allows the community to remain focused on v2 and upcoming money markets.

• Growth in dollar value supplied and borrowed: The USDC and DAI markets experienced the largest increase in dollar value supplied and borrowed. Note - many users on these markets have recursively levered their position to maximize yields. Recursive leverage accounts for ~32% of all deposits on v2. This compares to ~40% on Aave’s Polygon market.

• Reserve Growth: Aave reserves help provide the first layer of protection for borrowers and lenders. Since liquidity mining rewards launched, Aave’s v2 reserves have grown by ~$7MM.