Thank you to everyone who provided feedback - great points all around! To reiterate, this program is being proposed as somewhat of a “beta” to further investigate how the inclusion of liquidity mining rewards will benefit the Aave ecosystem. The poll closed with 62% of participants supportive of introducing rewards. To touch on a few points:
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Are Aave liquidity rewards needed? While Aave has seen success without rewards so far, this program would attempt to supercharge its growth at a relatively low cost to the treasury and Aave holders. Instead of a binary yes/no approach to rewards - one framework to consider is what token % makes sense? (0%, 0.5%, 1%, 5% etc). The proposed annual distribution of 1.3% of the fully-diluted supply is significantly lower than other DeFi protocols. @RyanRam brought up valid points on maintaining an ecosystem fund - we believe a lower LM distribution saves plenty of AAVE for ecosystem efforts down the line. The proposed 550 AAVE/day would use less than 7% of the 3MM AAVE reserve annually. Our view is that LM rewards can be distributed alongside grants and ecosystem initiatives. The community can also vote to stop/decrease rewards if needed.
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Migration: We don’t see migration as the primary reason for LM rewards. Any incentives to migrate are an add-on to the main focus - increasing liquidity and utilization in v2.
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Distribution mechanism: @EzR3aL’s multiplier system is an interesting idea (parallels to Ampleforth’s Geyser program) - perhaps this incentive structure can be layered on down the line to keep the initial distribution fairly simple. We agree with the lock up comments from @davidkohcw and @mapleleafcap. The 10 day vest is likely too short - 1/2 after the 10 day vest and 1/2 in 6 months may be a good compromise.
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Targeted pairs: @Defi_stalker and others mentioned a shorter list of target markets such as DAI, USDT, USDC, WBTC, and ETH. We believe this approach will boost rewards to the most productive markets and makes sense for the initial distribution. Over time, the community can always vote in new assets and stable coins.
Given the feedback, we will move a refined version of the LM proposal to the AIP Process. Again, this proposal attempts to trial LM rewards with a relatively low amount of AAVE.
Next Steps: When the AIP is live, we will need support from AAVE holders through delegation or a direct vote. We will post the AIP/vote details here.