title: [ARFC] Base Incentive Campaign Funding
author: @TokenLogic
created: 2025-05-06
Summary
This publication proposes launching a targeted incentive campaign to accelerate Aave’s adoption and growing market share on the Base network.
Motivation
During April variable Debt on Base has increased strongly on Aave Protocol from 337.9M to 377.9M, an 11.83% increase, meanwhile user deposits increased by only 3.92%. The growing demand for liquidity creates a competitive environment for both attracting user deposits and providing attractive funding rates.
The chart below highlights the improvement in demand for liquidity on the Base instance of Aave v3. The recent uptick in debt during April was only bettered by Avalanche and Ethereum v3 instances. Whilst Base continues to grow, Aave’s positioning can be improved by capturing a large portion of the debt expansion in the coming months.
With the use of incentives to create an improved deposit yield and lower cost of capital for borrowers, the resulting demand is expected to attract new liquidity deposits and new users seeking access to lower borrowing costs. Improving the value proposition for the end user is expected to strengthen Aave’s positioning within the Base ecosystem.
Incentives Allocation
With the use of targeted incentives and enhanced capital efficiency, the expected returns are strengthen by only rewarding Aave aligned user actions. The MASiv incentive distribution platform provides the infrastructure needed to reward users who migrate liquidity to Aave Protocol whilst also recognising the loyalty of existing users.
The table below outlines the initial rewards to be distributed to eligible users of Aave Protocol. The core component on the program relies on providing users with a low cost of capital whilst providing an attractive deposit rate that exceeds the SSR within defined budgetary constraints.
| Action | Borrow Rewards | Campaign Duration | Reward Asset | Criteria |
|---|---|---|---|---|
| Borrow USDC | 2.00% up to 250M before dilution | 6 months | aUSDC | Borrow USDC whilst having no idle USDC or aUSDC holdings. When total USDC debt on Aave exceeds 250M the rewards begin to dilute with increasing debt pro-rata. ie: 500M USDC debt equates to 1.00% in rewards. |
| Borrow GHO | 2.50% up to 50M before dilution | 6 months | aGHO | Borrow GHO whilst having no idle or aToken stablecoin holdings. When total GHO debt on Aave exceeds 50M the rewards begin to dilute with increasing debt pro-rata. ie: 100M GHO debt equates to 1.50% in rewards. |
An additional boost is to be provided to users who meet the criteria outlined below. To support identifying eligible users, a Snapshot of non Aave Protocol users was taken on the 2nd May 2025.
| Action | Supply Boost | Campaign Duration | Reward Asset | Criteria |
|---|---|---|---|---|
| Deposit cbBTC | 0.20% | 3 months | acbBTC | Migrate 100% of holdings from Morpho on Base and/or Ethereum to Aave on Base, Borrow USDC, GHO, WETH or EURC, Maintain Health Factor <2 with no idle or aToken USDC, GHO, WETH or EURC holdings. |
| Deposit wstETH | 0.50% | 3 months | awstETH | Migrate 100% of holdings from Morpho to Aave on Base only, Borrow USDC, GHO, WETH or EURC, Maintain Health Factor <2 with no idle or aToken USDC, GHO, WETH or EURC holdings. |
| Deposit USDC | 1.00% | 3 months | aUSDC | Withdraw 100% of holdings from Moonwell and Gauntlet vaults on Morpho on Base to Aave on Base. |
| Deposit GHO | 1.25% | 3 months | aGHO | Withdraw 100% of USDC holdings from Moonwell and Gauntlet vaults on Morpho on Base to Aave on Base. |
| Deposit ETH | 1.25% | 3 months | aWETH | Migrate 100% of holdings from Moonwell and Gauntlet vaults on Morpho to Aave on Base Network. |
| Deposit ETH | 1.50% | 3 months | aWETH | Migrate 100% of holdings from Moonwell and Gauntlet vaults on Morpho on Base to Aave on Base only, Borrow USDC or EURC, Maintain Health Factor <2 with no idle or aToken stablecoin holdings. |
| Deposit ETH | 1.75% | 3 months | aWETH | Migrate 100% of holdings from Moonwell and Gauntlet vaults on Morpho on Base to Aave on Base only, Borrow GHO, Maintain Health Factor <2 with no idle or aToken stablecoin holdings. |
For example:
A user with cbBTC on Morpho at the time of Snapshot can migrate 100% of the position to Aave, borrow USDC and GHO such that the health factor of the loan is <2 and earns 0.35% deposit yield, receive 2% discount on the USDC debt and 2.50% discount on any GHO debt.
The GHO portion of the debt receives a 3.00% discount whilst the USDC portion of the debt receives 2.50% discount.
If the borrowed USDC or GHO is held idle or deposited into Aave, the user receives no USDC and no GHO debt rewards.
If 99% of the cbBTC position withdrawn and migrated to Aave, but 1% remain on Morpho, user receives no deposit deposit yield.
If the cbBTC price appreciates and the Health Factor is >2, the user forgoes the 0.35% deposit yield for this duration of time.
Users are encouraged to manage the position on Aave to ensure eligibility is maintained.
Funding
Aave has accumulated significant revenues on the Base network via its Collector contract. To further stimulate growth, adoption on Base, this proposal aims to reinvest past revenue directly into ecosystem incentives.
Since the Base instance was deployed a total of 1.3M USD in revenue has been generated for the Aave DAO with 675,510 USD year to date. The Reserve Factor (Borrow Fees) is the dominant fee type generating 365.7K during Q4 2024 and 397.7K during Q1 2025, with liquidation fees providing a notable 140.6k USD contribution during Q1.
The charts below shows the weekly revenue generated by the Aave Protocol, Velora integration on the frontend and aTokens held in the Treasury.
To fund the upcoming incentive campaign, USDC, USDbC and cbBTC aTokens held in the Treasury is to be reinvested directly into ecosystem incentives. The ETH rewards component is to be funded from the existing Ahab Budget and GHO rewards mostly funded from the ALC budget.
Based upon Q1 2025 USDC Reserve Factor revenue, 236.1K USD, without considering the impact of the program, approximately 39% of the associated USDC Borrow Rewards cost would be recovered. If 100% growth in USDC debt is achieved, revenue would double along with the USDC Borrow Rewards cost.
Granting the AFC the permission to claim and transfer these funds to the MASiv address will enable efficient reinvestment of capital, supporting user growth, liquidity incentives, and ecosystem expansion on Base.
This ARFC proposes to grant the Aave Finance Committee (AFC) the allowance to claim all the revenues currently accrued to the Aave Collector on Base. The claimed revenues will be directed to the MASiv address to be used as incentives for the Aave ecosystem on Base.
Specification
Create allowances for the Aave Finance Committee to fund the Base incentive campaign.
| Asset | Amount | Address |
|---|---|---|
| aBasUSDC | ALL | Base: 0x4e65fE4DbA92790696d040ac24Aa414708F5c0AB |
| aBascbBTC | ALL | Base: 0xBdb9300b7CDE636d9cD4AFF00f6F009fFBBc8EE6 |
| aBasUSDbC | ALL | Base: 0x0a1d576f3eFeF75b330424287a95A366e8281D54 |
| aEthUSDC | 2.4M | Ethereum: 0x98C23E9d8f34FEFb1B7BD6a91B7FF122F4e16F5c |
- Spender: AFC
0x22740deBa78d5a0c24C58C740e3715ec29de1bFa - Method: approve() aBasUSDC, aBascbBTC and aBasUSDbC on the Aave Base Collector contract
0xBA9424d650A4F5c80a0dA641254d1AcCE2A37057to the AFC address
All claimed funds will be sent to the MASiv address when the whole incentive structure is finished, which will be responsible for managing and distributing incentives on Base.
Disclosure
TokenLogic does not receive any payment for this proposal.
Next Steps
- Gather feedback from the community.
- If consensus is reached on this ARFC, escalate this proposal to the Snapshot stage.
- If Snapshot outcome is YAE, an AIP will implement this proposal.
Copyright
Copyright and related rights waived via CC0.