Aave Proposes New Economic Model Draft: Buyback Dividend and Security Upgrade

The Aave team recently released a draft of a new economic model on the community forum, proposing expected upgrades in multiple aspects such as the value capture of the Aave token and the protocol's security model. This article will analyze the following key issues surrounding this important proposal:

1. The main content of the proposal
2. The potential impact of each item
3. The timeline and conditions for the proposal implementation
4. The medium to long-term impact of the proposal on Aave token prices

1. Core Content of the Proposal

The full name of the proposal is "AAVEnomics update", which is currently in the early "temperature check" stage of community proposals. The main content of the proposal includes:

1. Introduction to Aave's current operating status

The project maintains a leading position in the lending field, with income far exceeding expenses, ample reserve funds, creating conditions for economic model updates and the initiation of income distribution.

2. Update Bad Debt Handling Mechanism

• The original "security module" will gradually be phased out.
• The new "Umbrella" ( safety system is online, with the aToken module responsible for bad debt reserves.
• The reserve funds come from voluntary deposits by users, and can earn deposit interest and additional safety subsidies.

) 3. The New Role of Aave Tokens and Profit Distribution

• The Aave staking module is retained, but will no longer serve as a risk reserve.
• Staking Aave can earn protocol profit sharing in the form of buybacks.
• Staking Aave can earn "Anti-GHO", which can be used to offset GHO debt or deposited into the GHO staking module.

4. Changes in GHO Staking Module

The GHO staking module only guarantees a portion of GHO bad debts and no longer guarantees the entire protocol system.

5. Other changes

• Aave token liquidity management is handled by ALC.
• The exchange of Lend to Aave will be terminated.

![Interpretation of Aave's New Economic Model: Buyback Dividend, Security Module Upgrade]###https://img-cdn.gateio.im/webp-social/moments-791cbfcf24c02bd379a8d4019104ae0f.webp(

2. The Impact of the Proposal Content

There are two main aspects of influence:

1. The value capture of Aave tokens is more defined, and selling pressure is reduced.

   • Acquiring value through protocol revenue repurchase and GHO interest income
   • The staking module deactivation reduces the sell pressure of Aave tokens

2. The umbrella safety module enhances the flexibility of the protocol and governance requirements.

   • The AVS model similar to Eigenlayer allows for customizable incentives.
   • Increased the metrics that the risk team needs to evaluate.

3. Implementation Timeline and Conditions

The plan will be implemented in three phases.

) Phase 1: Staking Mechanism and GHO Mechanism Changes

• Condition: Achieved
• Time: After obtaining sufficient opinions from the community and approval from BGD Labs

Phase Two: Aave Token Function Update

• Condition:
  • GHO scale reaches 175 million
  • GHO Secondary Liquidity Enhancement
• It is expected to take a few months.

Phase 3: Start Buyback

• Conditions:
  • The net asset value of the income pool covers 2 years of expenses
  • Annualized income in the last 90 days reached 150% of expenditures from the beginning of the year to date.
• It is difficult to accurately predict the time.

4. The Medium to Long-Term Impact on Aave Token Prices

In the long term, this proposal will link the development of the Aave protocol to the value of the token, providing support for the token price:

• The token has a buyback floor limit.
• Holders receive cash flow income
• or attract more value investors

However, due to the time required for implementation and the phased approach, the value capture of Aave tokens will be a gradual process. If the proposal is successfully implemented, Aave, as a standardized governance and reward mechanism of major DeFi projects, is expected to attract a wider range of investors.

![Interpretation of Aave's New Economic Model: Buyback Dividend, Security Module Upgrade]###https://img-cdn.gateio.im/webp-social/moments-4357dfb3fe4a89f87c6cff42838324a3.webp(