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Aave’s new liquidity mining program kickstarts DeFi Summer v2

Photo of: Joseph Stone
by Joseph Stone

Aave wants to attract new customers and move up the DeFi hierarchy. How? By allowing lenders and borrowers to enjoy bonus returns in the form of stkAAVE tokens.

Will the distribution of governance tokens allow Aave to displace its direct competitor Compound? In any case, the rivalry is growing. The DeFi (decentralized finance) protocol launches its V2.

More precisely, with this version 2 comes into service its brand new liquidity mining program. And it will allow users to receive passive income until July 15. For what amount? Up to 880,000 dollars of governance tokens.

But Aave is targeting certain crypto investors in particular. As a result, users depositing stablecoins on the protocol will be able to enjoy additional returns of 4.78% to 13.49%. And that’s on top of the existing earnings in stkAAVE tokens.

The DeFi service is also interested in Bitcoin holders. Deposits in Wrapped Bitcoin, that is, Bitcoin tokenized to run on Ethereum, will be compensated with a bonus of 4.59%.

In contrast, the bonus is lower for Ether with “only” 2.11% interest. However, as Cointelegraph points out, Aave’s primary target is borrowers. And more specifically, borrowers of stablecoins.

To date, for these transactions, these customers receive rewards in the form of governance tokens at a rate between 5.15% and 22.05%. This argument clearly has the potential to attract new customers, at the expense of Compound.

Following the governance vote on April 24, 2,200 staked AAVE or stkAAVE will be distributed to the platform’s users through the liquidity mining program. Borrowers and lenders will be eligible until July 15th.

At the current token price, this represents almost $900,000 worth of tokens. What’s next? A re-evaluation of the liquidity mining program will take place in July. It could then be extended, but with different conditions.

For its development, Aave relies on stability and therefore transactions in stablecoins. More than two thirds of the rewards will go to the USDC and USDT markets. The remaining 32.5% will be shared between DAI, ETH, wBTC and GUSD.

The goal is official. Aave wants to reward stablecoins more to boost liquidity, and at the same time discourage risky borrowing. And to benefit from this, users must switch to V2 of its protocol.

“By introducing rewards for liquidity mining only on Aave v2, liquidity providers and borrowers will naturally migrate to the optimized version,” Aave points out.