On March 5, 2025, Marc Zeller – the founder of Aave Chan Initiative – announced the most important proposal in the history of the Aave DeFi protocol, aimed at changing the entire tokenomics of the AAVE token and optimizing liquidity.

Noteworthy AAVE Buyback Policy

The focus of this proposal is the activation of the $AAVE "fee switch", allowing the protocol to share revenue with AAVE holders. Specifically, Aave will use part of the revenue to buy back AAVE from the market.

Key information:

  • Aave's cash reserves currently stand at $115 million, an increase of 115% compared to last year.

  • Aave's DeFi lending market share remains stable at #TVL $18.6 billion.

  • Proposal to establish an Aave Finance Committee to manage the AAVE buyback budget, valued at $1 million/week for 6 months (estimated $24 million).

Optimize Liquidity Reward System

In addition to the fee switch, the Aave Chan Initiative proposes to optimize the liquidity reward system by:

  • Reduce staking rewards and liquidity provision, saving $27 million each year.

  • Switch to an AAVE buyback model instead of continuing token emissions.

  • Use revenue from the GHO stablecoin to buy back AAVE.

Anti-GHO Mechanism and Protocol Insurance

Aave makes the proposal even more attractive by introducing Anti-GHO, an ERC-20 token for AAVE stakers. Anti-GHO helps:

  • Burn GHO debt, maintain the peg of the stablecoin #GHO .

  • Create StkGHO in the Umbrella GHO Safety Module, helping users earn from staking.

Aave also emphasizes the role of the Umbrella Safety Module, insuring the protocol against risks during market volatility. Insured assets include USDT, $USDC , WETH, and GHO.

Officially Reclaim the LEND Token

Finally, Aave wants to reclaim the LEND token – the old token version before the project rebranded to AAVE in 2020. About 320,000 #LEND that have not been converted, equivalent to $65 million, will be returned to the protocol's budget fund.

Market Reaction

This proposal has caused the AAVE token price to rise more than 20% in just a few hours, showing a positive reaction from the community and investors.

While Aave is pioneering revenue sharing, many other DeFi projects like Ethena (ENA), Jupiter (JUP), Frax (FRAX), Hyperliquid (HYPE), and Uniswap ($UNI ) are also considering adopting similar models.

Currently, the proposal is still in the community feedback phase before officially voting for approval.

Note: This article is not investment advice. The crypto market carries many risks, and investors should conduct thorough research before making decisions.