Aave reimbursed accredited delegates for all gas costs incurred on-chain voting and deploying AIPs.
While the price of AAVE has increased over the past month, a correction may be on the horizon.
For the first time since the launch of the lending protocol, Aave [AAVE] has compensated its independent delegates for any gas fees they spent to vote on-chain and implement Aave Improvement Proposals (AIPs) on the DeFi platform.
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These payments were made to accredited delegates on July 9 after community members approved a proposal for a gas discount. Under the proposal, the decision to reimburse accredited delegates for all gas fees spent was necessitated by the continued rise in Ethereum gas fees, which in turn has led to a spike in the cost of on-chain governance for these delegates.
According to Aave, “giving delegates a discount on their participation” offers a number of benefits. Some of the benefits include encouraging better decision-making and promoting a diverse voter base, such as student organizations, by reducing barriers to entry. Reimbursing gas costs also helps Aave retain top delegates. This can ensure the growth of its ecosystem and to compete effectively with peers such as MakerDAO.
While the proposal did not specify where the rebate fees were obtained, the money to cover these costs most likely came from Aave Protocol revenue or coffers.
Aave generates revenue through various mechanisms such as loan interest charges, payday loan charges, and other protocol charges. Therefore, a decrease in network costs will often lead to a decrease in protocol revenue. Last year, the protocol generated cumulative compensation of $12 million. But according to data from Token terminalthis represented a 76% decrease in network tariffs.
As a result, Aave’s cumulative revenue declined over the same period. According to the same data provider, revenues on Aave fell 71% during the same period.
Realistic or not, here is AAVE’s market cap in BTC terms
The state of Aave’s TVL and governance token
The protocol’s TVL is up 59% since the start of the year. According to data from DefiLlama, Aave’s TVL was $5.857 billion, with the V2 deployment having a 66% share.
The protocol’s governance token, AAVE, saw an increase in value over the past month. Exchanging hands at $71.06 at time of press, the alt’s value grew 38% in the past 30 days, according to data from CoinMarketcap.
While the token appeared poised to continue its upward trend, an on-chain assessment revealed slight growth in profitable activity. This suggests that holders had started selling their Aave tokens. Although Aave’s Relative Strength Index (RSI) and Money Flow Index (MFI) traded above their respective centerlines on a daily chart, they have been trending downwards.
Similarly, AAVE’s Chaikin Money Flow (CMF) rested at -0.01 at the time of going to press, signaling that liquidity was leaving the market. If this continues, a price correction may follow.
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