Aave has launched its v2 protocol liquidity mining incentives for paying out governance token rewards exceeding 20% to users who borrow stablecoins.
It has been reported that users who deposit stablecoins into the protocol can earn an additional yield of between 4.78% and 13.49% on top of their regular gains in the form of staked Aave (stkAAVE) tokens as of April 27.
The report said that the highest rewards appear to be going to stablecoin borrowers, who are currently receiving rewards of between 5.15% and 22.05%. The liquidity mining program was passed through a governance vote on Saturday, with 2,200 staked Aave (stkAAVE) set to be distributed to lenders and borrowers until July 15, worth roughly $880,000 at current prices. The program will be reviewed in July.
Likewise, more than two-thirds of rewards have been designated to the USD Coin (USDC) and Tether (USDT) markets, with the remaining 32.5% being distributed among Aave’s Dai, ETH, wBTC, and Gemini Dollar (GUSD) markets.
“AIP 16 increases the liquidity in the Aave Ecosystem Reserve, which can be used to fund grants, devs, and builders through a community-led grants programme.”
It added that it wanted to reward stable tokens more to discourage risky borrowing and boost stablecoin liquidity. With around 40% of Aave’s TVL still locked in its version 1 iteration, the v2 rewards campaign is also intended to migrate users to its updated protocol.
Thus, Aave said:
“By introducing liquidity mining rewards only on Aave v2, liquidity providers and borrowers will naturally migrate toward the optimized version.”