AAVE brings several benefits, including governance power, safety measures, fee reduction opportunities, and potential token value appreciation. However, challenges such as governance participation, market volatility, and staking risks should be carefully considered.
AAVE tokenomics aim to create a sustainable and dynamic ecosystem.
Core development:30% User experience development: 20% Management and legal: 20% Promotions and marketing: 20% Miscellaneous costs: 10%
Out of AAVE's initial supply distribution, 23% went to the founders and 77% to investors.
The initial distribution percentages provide some insights into how AAVE intends to allocate its resources. I like the focus on core development and user experience.
AAVE has two primary use cases: governance and staking.
Through governance, AAVE holders can vote on how to use the treasury. Currently, it is filled via accumulation of the reserve factor discussed above and flash loan fees.
AAVE can be held by itself or staked through the AAVE protocol. Staking AAVE means you volunteer your AAVE as deposit insurance. Currently, up to 30% of your staked AAVE can be taken by the protocol and sold off if there are not enough assets to cover debt after a liquidation. Show Less
