Safety Module

Staking in the Aave Safety Module allows AAVE, GHO, and ABPT holders on the Ethereum network to contribute to the protocol's security while earning Safety Incentives. By staking, participants add an additional layer of protection, with the acknowledgement that their assets may be slashed in the event of a shortfall to cover any protocol deficits. Underlying tokens that can be supplied to safety module are listed below:

Safety Incentives are rewards distributed to participants who stake their assets in the Aave Safety Module. These incentives serve as compensation for the risk taken by stakers, whose assets may be slashed to cover protocol deficits in the event of a shortfall. Safety Incentives are primarily distributed in the form of AAVE tokens, and the amount allocated to stakers is determined by Aave Governance through votes on emission parameters.

The emission parameters, which dictate the rate of Safety Incentives, are voted on by the Aave DAO. These parameters are allocated from the Ecosystem Reserve (AAVE Tokens) and/or the Protocol Treasury. Governance votes allow AAVE token holders to influence how much of the reserve or treasury is allocated to these incentives and how they are distributed over time. This decentralised decision-making process aligns incentives with the overall health and security of the Aave ecosystem.

Safety Incentives accumulate over time and can be claimed at any point while tokens are staked or after un-staking from the safety module.

When staking in the Aave Safety Module, it’s important to be aware of the potential slashing risks. Slashing refers to the reduction of staked assets in the event of a shortfall event within the Aave Protocol. This mechanism is in place to protect the protocol by using a portion of staked assets to cover any deficits that may arise. While staking offers rewards through Safety Incentives, there is a risk that a portion of the staked assets could be slashed to contribute to the stability of the Aave ecosystem.

The extent of slashing varies depending on the type of token staked:

These risks are an essential consideration for anyone looking to participate in the Aave Safety Module, as they reflect the potential loss of assets in exchange for helping to secure the protocol. The process of identifying and executing a slashing event is subject to an onchain Aave Governance proposal.