Aave will be giving out rewards to its yield farming users with incentives worth over $800,000, and it will last till mid July.
Yield Farming is one of the ways that cryptocurrency owners can use to increase their gains from crypto.
Major Signals
- This is the first time Aave is trying out the yield farming
- The Liquidity Mining will last for three months.
- The Users will be rewarded with staked AAVE.
- Users will have the opportunity to vote for striking or continuing the venture.
It is a method of multiplying the amount of crypto you have. It entails you lending your money to others using smart contracts, which are computer programs. You receive payments in the form of cryptocurrency in exchange for your services.
Farmers who want to increase their yield can use highly complex techniques. To optimize their returns, they constantly switch their cryptos between various lending marketplaces. It's not new to crypto; many other cryptocurrencies used this reward system as token lenders and borrowers.
Sixth Largest DeFi, Aave, recently announced that it would begin Liquidity Mining. Aave is experimenting with a liquidity mining initiative of its own. When users lend or borrow Ethereum and some other stablecoins, the platform will automatically pay them in Staked Aave beginning today.
Staked Aave is also known as stkAAVE.
Putting up the token grants users incentives, as well as dividends on their deposits. This software helps them to win more staked AAVE incentives. Staked Aave is worth the same as AAVE, currently trading at about $400. After obtaining it, they must wait ten days to transform it to the AAVE governance token.
This was put forth by an AAVE user. He called attention to using liquidity mining to attract cash flow into AAVE. He also pointed out that it would ensure borrowers can get the loans they need.
Furthermore, he argued, it would encourage people to upgrade to Aave's version 2. Users were still in version 1 due to the expensive gas fees on ethereum, preventing users from switching.
The participants in the yield farming would automatically switch to the version they believe to be better if mining incentives are only available on Aave v2. This is because the incentives in v2 are multiplied. Every day, there will be 2,000 staked tokens distributed amongst the users.
Conclusion
For AAVE, this is one genius move. They found an interesting way of killing two birds with one stone. This idea will mean that more users will flock to take advantage of this high-yield opportunity. This would mean bringing more users to the platform. It would also push more users to the new version 2 platform.
Aave is not the first to do this, though. Last year, Uniswap got involved in liquidity mining. And Compound has been operating it since last year. It is time for Aave to use this opportunity to expand its base.
Question of the day
What do you think this venture would mean for AAVE? Let us know what you think in the comments.
