title: [ARFC] Safety Module Emission Update
author: @TokenLogic
created: 2025-07-10
Summary
This publication outlines the next incremental reduction in AAVE emissions being distributed to stkAAVE and stkABPT holders.
Motivation
stkAAVE
On the 5th June 2025, the Umbrella upgrade went live and the AAVE emissions for stkAAVE reduced by 45 AAVE/day from 360 to 315 AAVE/day. The chart below show the stkAAVE yield reducing from 4.58% to 4.0% as intended when the Slashing risk was reduced from 30% to 20%.
The current stkAAVE yield is 3.95% and represents 19.33% of Total AAVE supply with 22,675 unique users, up from 20,023 on the 5th June 2025. Since early April AAVE deposits in stkAAVE have been gradually increasing and only 3.82% of stkAAVE in cooldown, indicating stkAAVE has achieved an equilibrium with only minor flows in and out of the contract.
Over the last 30 days, an additional 43,664 AAVE has been deposited into stkAAVE, with 26,595 deposited on the 7th June, two days after the Umbrella upgrade went live.
Given the strong support for stkAAVE over the 30 day period since Umbrella went live, exceeding our expectations, this publication proposes the next reduction in Slashing Risk and AAVE emissions.
By reducing Slashing from 20% to 10%, the risk exposure is reduced by half. With an improving risk profile, the AAVE emissions are to be revised lower to 260 AAVE/day, or 3.25% at current deposit levels.
Umbrella
User deposits into Umbrella have been growing steadily with 280.7M of Coverage relative to a Target Coverage of $248.9M.
Source: Aave Analytics | TokenLogic
Source: Aave Analytics | TokenLogic
Prior to the Umbrella Upgrade, Aave DAO was distributing 700 AAVE/Day and if this proposal is implemented the Emission rate becomes 390 AAVE/Day. Upon implementing this proposal, emissions will have been reduced by 310 AAVE/day since Umbrella was launched, valued at an estimated $30.5M annually.
| Category | Pre-Umbrella Emission Rate | Post Umbrella Emission Rate | Proposed Below |
|---|---|---|---|
| stkGHO | 100 | 0 | 0 |
| stkABPT | 240 | 215 | 130 |
| stkAAVE | 360 | 315 | 260 |
| Amount($) | 700($189k) | 530($143.1k) | 390($105.3k) |
Assuming: 1 AAVE = 270 USD
The reduction in AAVE emissions, $30.5M, compares favourably to the current Umbrella $8.7M budget, consisting of 7.2M stablecoins and 550 WETH. Upon implementing this proposal, the net reduction in emissions from Umbrella and the Safety Module is valued at $20.8M annually.
More broadly, the shift from AAVE emissions to Cashflow reflects the progressive implementation of AAVEnomics which also contains a 26 week buyback program at an annualised rate $52M.
stkABPT
Since the Umbrella upgrade went live on the 5th June 2025, when stkABPT emissions reduced from 240 AAVE/day to 216 AAVE/day, only 51,217 BPT tokens, or 8.21% of the liquidity has been withdrawn from the Balancer liquidity pool. The vast majority of the withdrawal volume was by a single user that withdrew 50k units on Jun-06-2025. Otherwise, the number of unique users remains unchanged with a net reduction of 2 users over the last 30 day period.
Source: Aave Analytics | TokenLogic
Note: Exponential Y-Axis.
Source: Aave Analytics | TokenLogic
Over the last 30 days, the average yield received by ABPT stakers is 11.99% comprised of 0.55% from wstETH, 1.35% swap fees and 10.09% from AAVE emissions. At near 12%, the APY is at the top of the previous target guidance of 10-12% with a 20% Slashing exposure.
With only 1.25% of stkABPT in Cooldown, it indicates an equilibrium has been achieved, and we are now well placed to revised the AAVE emissions.
Reducing the Slashing exposure from 20% to 10%, improves the overall risk profile of holding stkABPT. A new guidance of 8% total yield for holding stkABPT is proposed comprised of 0.55% wstETH yield, 1.35% swap fee derived yield and 6.10% in AAVE emissions.
Whilst this represent as material change from ~12% to ~8% total yield, the liquidity pool contains generous levels of liquidity relative to swap volume passing through the pool. Utilisation of liquidity, Swap Volume / Pool TVL, remains mostly unchanged with 91.4% of swaps being $40k USD or smaller in size relative to a $211M TVL liquidity pool. A reduction in pool TVL is not likely to impede the pools ability to attract swap volume.
The emergence of new liquidity pool(s) mentioned in the next section presents an opportunity to measure the impact of new liquidity pools with improved capital efficiency.
Source: Aave Analytics | TokenLogic
AAVE Liquidity
Balancer
As mentioned in the earlier forum post, we continue to work closely with the Balancer team to explore new concentrated liquidity pools with automated built in rebalancing. The first reCLAMM prototype pool is now live on Ethereum and we expect to start working with LPs to grow deposits and gather more data on how the pool behaves over time before we consider providing Protocol Owned Liquidity (POL).
Source: Balancer AAVE/wETH Pool with further insights available in Balancer’s documentation.
The below outlines some of the advantages of this pool type:
- All the benefits of concentrated liquidity: higher fees and better capital efficiency (when in range, same math as UniV3)
- None of the maintenance required with traditional concentrated liquidity pools: LP-and-forget
- Moreover, unlike third party ALMs, the rebalancing is entirely transparent
- Fungible positions can be incentivised, making them ideal for guaranteeing deep DAO token liquidity
- Calculations simplified by having all LPs share the same price range
reCLAMM Pools automatically adjust to market conditions; LPs should always be earning fees - While designed to be maintenance-free, reCLAMM Pools are tuneable by admins if necessary in extreme conditions
Aerodrome
Previous efforts to support AAVE liquidity on Base continue to support ±10M TVL in AAVE/WETH liquidity earning 24.56% APR at no cost to Aave DAO for Liquidity Providers on Aerodrome. The yield currently exceeds what is available on Ethereum, and the pool continues to grow steadily whilst being dependent upon a concentrated liquidity provider base.
Source: https://dune.com/0xkhmer/aerodrome
Source: https://dune.com/0xkhmer/aerodrome
Specification
This proposal when implemented via AIP will:
- Reduce AAVE Emissions
| SM Category | Current | Proposed |
|---|---|---|
| stkAAVE | 315/day (3.94% APY) | 260/day (Est. 3.25% APY) |
| stkABPT | 216/day (10.09% APY) | 130/day (Est. 6.10% APY) |
Total yield for stkABPT holders revised from 11.99% to 8.00%, with 0.55% from wstETH, 1.35% swap fees and 6.10% from AAVE emissions.
When implemented the AIP will reduce daily AAVE emissions by 141 AAVE, from 531 AAVE/day to 390 AAVE/day. The reduction in AAVE emissions is equivalent to a cost saving of $13.9M assuming $270 price. After the AIP is implemented, the annualised AAVE Emission rate is 142,350 AAVE/year, equivalent to $38.4M annual spend at $270/AAVE.
- Reduce Slashing Risk
| SM Category | Current | Proposed |
|---|---|---|
| stkAAVE | 20% | 10% |
| stkABPT | 20% | 10% |
Forward Looking Statement
In approximately 30 days after the AIP is executed, we will review how users have responded to the rewards adjustments and the impact of various growth initiatives being pursued before presenting the next steps towards optimising the Safety Module.
Directionally, users can expect the following:
- With an increasing focus on Umbrella, Slashing on stkAAVE and stkABPT is to be reduced to 0.
- Further optimisation of AAVE emissions to stkABPT and stkAAVE holders is expected within the next update to reflect the improved risk profile of reducing Slashing from 10% to 0% in line with the broader AAVEnomics implementation.
- The DAO is currently pursuing several growth initiatives that could lead to stkAAVE rewards may be revised lower than expected with capital being reallocated towards medium to longer term growth initiatives.
- Continue to trial new AAVE DEX liquidity pools as we prepare to migrate liquidity to new more capital efficient concentrated liquidity pools.
- Deploy Protocol Owned Liquidity leading to further reductions in AAVE emissions being used to sustain AAVE liquidity across DEX pools.
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, escalate this proposal to the AIP stage.
Copyright
Copyright and related rights waived via CC0.