Aave
Mechanism map
- Deflationary token
- Governance Token
- Yield-Bearing Staking
Represents the accrual of value for all AAVE holders as a result of AAVE buyback program. For details on the program, observe the Original proposal. In short, the buyback volume has a target of up to $1M/week.
Value drivers
Reflects the deflationary appreciation for all AAVE holders due to the buyback program
Due to the AAVE buyback program, all AAVE holders have an exposure to deflationary appreciation of the token due to continuous supply reduction. The specifics are available in the Original proposal.
[22] = ƒ(circulating_supply, burn_volume)
circulating_supply — is the total circulating supply of AAVEbuybacked_amount — is the bought back amount of AAVE in a given timeframeRepresents value derived from controlling the decision-making in Aave DAO, such as AIP voting and protocol parameters. Both staked and not staked AAVE hold the voting power.
Value drivers
The Aave governance process is multi-step. First, a proposal is created in the Governance Forum. After sufficient discussion, it is submitted to a non-binding general vote on the Aave Snapshot.
This vote is called a Temp Check vote and serves to gauge community sentiment. Then, the proposal moves to the RFC (Request for Final Comments) stage, where it undergoes formal scrutiny and another non-binding Snapshot vote. After that, the proposal becomes a fully-fledged AIP and is submitted on-chain via the governance contracts:
Votes are then submitted by voters via the VotingMachine contract. Upon validation by the Governance contract, the vote results become binding and executable via the PayloadsController.
The legacy safety module for AAVE is represented by the stkAAVE contract. Users may deposit AAVE there and withdraw after declaring a cooldown period. Once the cooldown period elapses, withdrawals are possible within a two-day window and are not possible thereafter.
Rewards are sourced from the Aave Ecosystem Reserve at a daily rate of total allocation specified by the DAO. Currently, the allocation is 315 AAVE per day, which projects to a 3.94% APY.
In case of a bad debt emergence, slashing is done via the Lvl1 Aave Executor by invoking the slash method of stkAAVE.
In April 2025, a proposal had passed and had been executed; a quantity of aEthUSDT is approved by the Ecosystem Reserve, and thereafter the Aave Finance Committee uses the approved funds to perform AAVE purchases on secondary markets or via market makers.
The repurchased AAVE may then be burned subject to a governance decision.
represents participating in the governance
Reflects participation in the governance process (act of voting) in order to derive value from influencing Aave DAO operation.
[8] = Binary
represents value derived from decision-making in Aave DAO and protocol parameters adjustment
Reflects the value originating from participating in decicision-making in Aave Dao. The scope of governance includes protocol deployment decisions, parameter adjustment, and design of new or reworked protocol infrastructure units (e.g., the recent rework of the safety module into Umbrella).
[3] = ƒ([8], user_vote_allocations, user_strategy_representation)
user_vote_allocations — is the representation of allocations of votes by the user during the votinguser_strategy_representation — is the representation of the user's governance outcome preferencesRepresents the still-extant allocation of yield to the AAVE staked in the legacy Safety Module. The allocation will be gradually decreasing along with the slashing risk (the slashable relative volume of stkAAVE) until the slashing risk is eliminated and a residual yield, which may be nonzero, is assigned to stkAAVE.
Both parameters are adjusted via AIPs. Read the most recent AIP to learn more.
This mechanism represents the infrastructure built to incentivize and support AAVE staking to fill up the Safety Module and protect users from bad debt.
However, the importance of this mechanism will steadily decline as Umbrella phases out the Safety Module entirely because, unlike stkGHO, stkAAVE has no Umbrella counterpart.
Value drivers
represents staking AAVE in the legacy Safety Module to secure protocol users from bad debt
Reflects the staking of AAVE into the Safety Module (now being phased out in favour of Umbrella, which was launched in June 2025 and allows for staking of aTokens instead). This staking is associated with a cooldown period of 20 days between requesting and performing the withdrawal.
Whilst staked, the tokens are subject to slashing of up to 20% of the staked assets. Slashing occurs in the case of an event leading to emergence of bad debt that needs to be covered.
The legacy Safety Module is going to be active until Umbrella reaches sufficient scale.
[7] = ƒ(staking_period, amount_staked, price_at_staking, expected_slashing_amt)
staking_period — is the length of the lock-up period set up by the useramount_staked — is the amount of tokens locked up by the userprice_at_staking — is the price of the locked token position when locking them. It defines the locked value (the upper bound of forfeited value) together with the locked amountAAVE_slashing_amt — is the amount of AAVE slashed in a given periodrepresents receiving yield on the staked AAVE
It reflects the accrual of yield on the staked AAVE, which is meant to incentivize Safety Module staking.
Now that Umbrella is live, the slashing risk (the slashable portion of the stake) and the associated APY will gradually decrease for the legacy Module, as well as for the stkAAVE, which has no Umbrella equivalent. As of 07/27/25, the APY is 3.94%, and daily emissions are 315 AAVE.
[21] = ƒ([7], daily_emission)
daily_emission — is the DAO-set daily emission determining the target APR