Aave – the decentralized lending protocol – has two new improvement proposals that were recently submitted to governance for official voting.
After valuable discussions on the governance forum, 2 new Aave Improvement Proposals (AIPs) have been submitted for a governance vote. $AAVE and $stkAAVE holders can now vote on AIP2 and AIP3! Overview of the AIPs in the thread
— Aave (@AaveAave) November 18, 2020
Aave Improvement Proposal (AIP) 2 is all about the current burning of the previous LEND token. The proposal states that instead of burning LEND tokens, fees from Aave V1 should be collected and used to bootstrap a protocol fund. Currently, Aave V1 collects a small portion of the borrowing and flash loan fees to convert into LEND token for burning. To date, over 2.3M LEND has been burned through this mechanism.
After AIP1 passed and the migration from the LEND token to AAVE commenced, the LEND token supply began to steadily shrink making the burning of LEND rather inefficient. AIP2 proposes that the collected fees be put towards a fund managed by governance. Based on the feedback on the forum thread so far, most Aave community members are in favour of this proposal and wish to move past the dated token burn model.
AIP3 on the other hand proposes a few V1 upgrades that ensure a seamless transition to Aave V2. Currently, there is 11,341,692 aLEND deposited in the Aave protocol reserve. These assets are being used by Aave community members as collateral and AIP3 will enable these users to migrate from Aave V1 to AaveV2 using a flash loan-powered migration tool. A tool like this would be useful not only for the current aLEND holders but really anyone that still has any assets deposited on Aave V1.
Besides ease of use for users of the protocol, this also brings a ton more volume to flash loans on Aave which ultimately benefits token holders as well.
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