Decentralized lending protocol Aave could turn on a mechanism that would redistribute transaction-generated fees out to holders and stakers of the protocol’s native token AAVE.
In an X post on April 6, Marc Zeller, founder of the Aave Chan Initiative (ACI), said a temperature check to gauge sentiment towards the decentralized autonomous organization (DAO) activating a “fee switch” could come as early as next week.
The Aave treasury "Cash" (Eth & Stables) is now at 50m$. (2.5 years of operational costs)
Net DAO profits are currently at $50m/year and growing.
Temp check to activate "fee switch" next week.
You can track the treasury balances with @zapper_fi 👇https://t.co/HNRTcA5jCf
— Marc “Chainsaw” Zeller 👻 🦇🔊 (@lemiscate) April 6, 2024
Zeller also shared details of the Aave DAO’s financial position, noting that the treasury held $50 million worth of ether and stablecoins, while DAO profits are currently at $60 million per year.
The current run rate puts the DAO in a position to meet operating costs for the next five years, Zeller said.
A fee switch proposal gives the DAO free rein to make changes to the protocol’s fee mechanism. In DeFi protocols, fee switches are typically used to redistribute fees collected from transactions to protocol token holders and stakers.
Zeller had previously suggested activating fees for Aave stakers by revamping the safety module in an X post last month, noting that stakers of Aave’s GHO stablecoin earn fees via Merit — a periodic airdrop system designed to reward protocol-aligned users.
In January, the Aave DAO approved making changes to GHO’s staking fees in order to improve its peg stability. Meanwhile, decentralized exchange Uniswap appears to be on track to implement its own fee switch proposal and is in the process of conducting additional audits for the protocol upgrade. An onchain vote on the proposal is expected later this month, subject to the results of the remaining audits, according to the Uniswap Foundation’s executive director Devin Walsh.
