Aave ponders reorganization of DeFi fee distribution

Aave, the decentralized lending platform, is reportedly considering the implementation of a “fee switch” to distribute fees to token holders. Marc Zeller, the founder of Aave Chan Initiative, revealed that discussions about activating the fee switch will begin next week. Currently, Aave DAO, the community-driven organization behind Aave, generates approximately $60 million in annual net profits. Aave is a cryptocurrency lending platform that operates on the Ethereum network, allowing users to borrow in one cryptocurrency and use another as collateral. The platform is governed by Aave token holders who form the Aave DAO. Zeller had previously hinted at the possibility of introducing fees for Aave stakers. The fee switch would provide governance with the ability to control and adjust fee-related policies based on the platform’s needs and objectives. Aave DAO recently approved changes to staking fees for its stablecoin, GHO, to maintain its peg. If the fee activation proposal is approved, it will follow in the footsteps of Frax Finance, which recently reintroduced its fee switch. In a separate development, AaveDAO discussed imposing collateral restrictions on the Dai cryptocurrency. Chaos Labs, a risk management advisory firm, proposed a 12% reduction in Dai loan-to-value ratios, contrasting with Zeller’s recommended 75% reduction. Aave also put forward a proposal to set DAI’s loan-to-value ratio to 0% across all of its deployments and suggested removing sDAI incentives from the Merit program. This move counters MakerDAO’s plan to increase the DAI credit line to 600 million DAI per month. Additionally, Uniswap, a decentralized exchange, is preparing to present its own fee switch proposal in mid-April.