Introduction
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 supplied to safety module are listed below:
Tokens can be supplied through protocol smart contracts or through a frontend such as Aave Labs interface, by performing the following steps:
Step 1: Connect Wallet
To begin, press ‘Connect Wallet’ and select the Ethereum wallet provider corresponding to the wallet holding tokens intended to supply to safety module.
Step 2: Select Safety Module Pool
Once connected, navigate to the 'Stake' tab where you’ll find a list of available safety module pools.
Step 3: Approve Token Transfer
In order to transfer tokens on an Ethereum-based network, the staked token smart contract must be granted an allowance to transfer tokens from the connected wallet address. After selecting a pool to supply, a modal will appear which will prompt a transaction in the connected wallet.
Step 4: Perform Stake Transaction
After approval, enter the amount you wish to stake and confirm which will prompt a transaction in the connect wallet. Your tokens are then added to the Aave Safety Module, where they will start earning safety incentives, which can be monitored from the 'Stake' tab.
Understanding Slashing Risks
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 your 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:
stkAAVE and stkABPT: Maximum slashing risk is up to 30% of the staked assets. stkGHO: Maximum slashing risk is up to 99% of the staked assets.
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 exeucting a slashing event is subject to an onchain Aave Governance proposal.