Aave V3 Incentives

Incentives within the Aave Protocol encourage active participation from suppliers and borrowers, enhancing liquidity and the overall efficiency of the protocol. Incentives can come from the Aave DAO treasury or from external parties that want to promote liquidity for specific reserves.

The Aave DAO, governed by AAVE token holders through proposals and voting, can allocate funds from the DAO treasury to incentivize certain activities within the protocol. Incentive programs funded by the DAO are proposed, discussed, and approved through the Aave Governance process, ensuring community involvement and transparency.

Liquidity Pool Incentives

Incentives can also be applied to the supply or borrow side of Aave liquidity pools, promoting activity of the incentivized reserve. By offering rewards to suppliers and borrowers of certain assets on Aave, the visibility and adoption of tokens can be boosted. Such external incentives require governance approval.

Approved incentives are distributed continuously over time proportional to the amount of liquidity a user supplies or borrows. Users can claim these rewards via the protocol’s incentive controller, which manages the allocation and distribution of incentives. This system adds value for those actively participating in the protocol while aligning user interests with the health and stability of the Aave ecosystem.

Umbrella

Users can stake aTokens and GHO in Umbrella to cover bad debt in the Aave Protocol. In return for taking on slashing risk, stakers earn Safety Incentives in reward tokens set by governance.

Merit Program

Merit is an Aave-alignment user reward system, designed as a merkle-tree-based periodic airdrop to incentivize Aave-aligned behaviors and enhance the competitiveness of the Aave Protocol. Rewards are available on the Merit dashboard.