DEFIDEVELOPMENT

【Dapp Pocket】DeFi Weekly Report for the first week of October: AAVE's new token launch, what should existing users know?

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【Dapp Pocket】DeFi Weekly Report for the first week of October: AAVE

Dear DeFi enthusiasts,

This week, Aave has officially opened the transfer of AAVE tokens. Now all LEND holders can exchange AAVE at a ratio of 100:1 on the official website and stake them in the safety module to earn staking rewards. This week's focus is on the new AAVE token and the safety module.

In addition to the launch of the AAVE token, this week's highlights include the unexpected exposure of Andre Cronje's new project Eminence, which resulted in users losing $15 million due to a hacker attack; Zinken testnet will be conducted before the launch of ETH 2.0; and DeFi insurance protocol Nexus Mutual has launched a new staking mode called "Shield mining."

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The experts have selected key points for you this week: Andre Cronje of Yearn reviews the critical mistakes he made, Ryan from Bankless introduces social tokens, and Marc from Aave urges the public not to blame Andre Cronje just because they failed to assess risks properly!

1. Our Perspective

AAVE New Token Launch, What Old Users Should Know?

Aave Officially Launches New Governance Token AAVE

The long-awaited AAVE token is finally live! With the exchange Uniswap that listed UNI last month, as well as the stablecoin protocol Maker, the top three platforms in terms of locked value in the DeFi world have officially entered the community governance arena. Users currently holding the Aave old token LEND can directly visit the conversion page on the official website to convert LEND to AAVE at a ratio of 100:1. The new token is a governance token, allowing holders to participate in future AIP governance votes. The total supply of AAVE is 16 million, with 13 million used to replace the circulating old token LEND on the market, and 3 million allocated to the Aave ecosystem reserve for the Safety Module and community governance incentives.

Safety Module

After the conversion, holding AAVE can be staked immediately in the new Aavenomics mechanism Safety Module to earn staking rewards. The funds in the Safety Module are used to prevent future liquidity shortages in the Aave ecosystem. The staking rewards currently come from a daily distribution of 400 AAVE from the ecosystem reserve. If approved through a community vote, some funds will be directed to the Balancer liquidity pool, allowing stakers to earn additional rewards by mining BAL tokens.

NFT Platform Aavegotchi

Aave's new economic model goes beyond governance and the Safety Module. Aave sponsors many community-initiated projects, such as the NFT platform Aavegotchi, which introduces DeFi to the masses in a unique way. Unlike most artistic and non-fungible token NFT projects, Aavegotchi operates using a code-audited, founder-publicized, and rarely implemented DAICO fundraising model. With the DeFi mining frenzy slowing down and NFT discussions gaining momentum, it seems Aave is once again leading the way!

Should You Upgrade to AAVE Immediately?

We found that AAVE currently does not have a set redemption deadline, meaning LEND can be unconditionally converted to AAVE "at any time." However, AAVE can only be obtained by trading LEND on the market, which actually makes the old token more dominant. If the AAVE market price is more than 100 times higher than LEND, arbitrageurs will immediately enter the market, sell AAVE, buy LEND, and then convert it back to AAVE. In other words, the price of LEND may outperform AAVE.

As a solution, Aave currently provides earnings for users staking AAVE—about 11% APR at the time of writing. This is a decent return for staking DeFi tokens. However, platforms like Balancer and Sushi Swap currently offer over 15% returns for LEND (as of the time of writing).

From an annualized return perspective, hastily converting LEND, which is already being used for liquidity mining, into the new token and participating in the Safety Module may not be the most cost-effective strategy. And although AAVE has liquidity pools on platforms like Uniswap, Balancer, and SushiSwap, the trading volume is currently low. Therefore, as a retail LEND holder, if you are already engaged in liquidity mining, the current strategy is to continue mining and wait for Aave's community to introduce new incentive measures (such as upcoming BAL mining). It's not too late to switch to AAVE when that happens. If you are not using LEND for mining, it is recommended to switch to AAVE immediately and stake it in the Safety Module!

Finally, depositing AAVE into the Safety Module should not only be seen as a source of income but also as a support for the security of the Aave ecosystem. Besides the fluctuating APR, we often ask ourselves: Do you want to be rich, or do you want to be right? 🙂

Further Reading:

2. Highlights of the Week

✨ Headlines of the Week

Andre Cronje's New Project Unexpectedly Exposed! Enthusiasts Buy In Frenzy, Hackers Exploit Vulnerabilities and Harvest $15 Million

YFI's founder Andre Cronje shared a photo of his new project eminence.finance on Twitter last week. Despite no additional information, many FOMO investors bought in, leading to malicious attacks by hackers who successfully profited $15 million. Interestingly, the hackers voluntarily returned $8 million in stablecoins to AC, with AC committing to compensate the victims with the $8 million.

Aave Token LEND Begins Migration to AAVE New Token

On October 2nd, Aave's new economic model Aavenomics announced the opening of the migration of LEND to AAVE. Users can find the "migration" option on the Aave Dapp page and migrate with a ratio of 100 LEND to 1 AAVE. After migration, users can stake AAVE in the Safety Module to provide security for AAVE and earn interest.

DeFi Insurance Protocol Nexus Mutual Launches New Staking Mechanism "Shield Mining"

DeFi insurance protocol Nexus Mutual launched a staking system called "Shield Mining" last Wednesday. The first project eligible for liquidity mining is the tBTC issuer Keep, where users can currently earn KEEP rewards by staking Nexus Mutual's native token NXM.

ETH 2.0 to Undergo Zinken Dress Rehearsal Before Launch

Ethereum 2.0 project lead Danny Ryan stated that the Spadina test is crucial, but the testnet revealed some issues, such as CLI options, testnet configurations, and genesis calculation errors. Therefore, another "Zinken" dress rehearsal is deemed necessary. Zinken is expected to go live on October 5th.

🚀 DeFi Protocols

🛠 Liquidity Mining

💰 Financing

👻 NFT

📨 Other

3. Insights from Industry Leaders

Yearn Founder Andre Cronje: I will no longer use this public Twitter account and ETH address for deploying new projects starting today

Bankless Advocate Ryan Sean Adams: Social tokens, what are they? Check out what exciting things they have to offer

Aave's Marc Zeller: Grow up a bit, don't let us lose good creators, okay?

4. Data Indicators

The data this week is from 2020/9/29 to 10/5. Total Value Locked (TVL) indicates how much assets are stored on the platform; Interest Per Year (IPY) is the current lent funds * annual lending interest rate, representing the platform's annual interest income. Data Source: DeFi Pulse, CoinGecko. (Unit: million USD)

5. Memes

Author Bio

  • Raizel / Economics major at NCCU, trapped by Bitcoin and now focusing on DeFi

  • Thomas / DeFi enthusiast working in chip design in Boston

  • Anderson / Founder of Dapp Pocket, believes in DeFi deposits over bank deposits