Aave is a decentralised non-custodial liquidity market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralised (perpetually) or undercollateralised (one-block liquidity) fashion.
AAVE (token) is used as the centre of gravity of Aave Protocol governance. AAVE is used to vote and decide on the outcome of Aave Improvement Proposals (AIPs). Apart from this, AAVE can be staked within the protocol Safety Module to provide security/insurance to the protocol/depositors. Stakers earn staking rewards and fees from the protocol.
🧠Aave Governance
Aave Governance V2 is an exciting new evolution of on-chain governance, allowing unique features, rapid protocol upgrades via short time lock executors, and governance upgrades via long time lock executors. This ensures the protocol can rapidly adjust to changing market conditions, as well as upgrade core parts of the protocol as time goes on.
📈 Governance Power
AAVE and/or stkAAVE token holders receive governance powers proportionally to the sum of their balance.
There are initially two powers associated with each governance token:
- The proposal power that gives access to creating and sustaining a proposal.
- The voting power which is used to vote for or against existing proposals.
Any user can choose to delegate one or both of the governance powers associated with a token, either through our governance portal or programmatically.
📄 Governance Proposals
The steps for a successful governance proposal are:
- Creating an Aave Request for Comments (ARC) and receiving community input.
- If the ARC is non-contentious, then submitting an Aave Improvement Proposal (AIP).
- The AIP, including the necessary payloads, are submitted to the protocol for a governance vote.
If successful, the AIP’s payload will be automatically executed and implemented.
For a detailed overview of the proposal life-cycle, see the Developer Docs.