A proposal may be in the works at the decentralized lending platform Aave (AAVE), deliberating the activation of a ‘fee switch’ to distribute fees to holders. This was shared by Aave Chan Initiative founder Marc Zeller on the X social platform.
Zeller said, “Temp check to activate ‘fee switch’ next week,” after noting that Aave decentralized autonomous organization (DAO)’s current net profits total about $60 million per year, reflecting five years of operational costs.
Aave is a crypto lending platform that runs on multiple blockchain networks. It allows borrowers to take out loans in one cryptocurrency while depositing another as collateral. It is governed by holders of the Aave token, who collectively form AaveDAO.
In a prior post on the X social platform, Zeller hinted at the possibility of implementing fees for Aave stakers. On March 16, he wrote, “A new iteration of the safety module will suggest distributing fees to stakers.”
A “fee switch” typically refers to a feature or mechanism within a system or platform that allows for the activation or deactivation of specific fees or charges. In decentralized finance (DeFi) protocols like Aave, a fee switch might enable the distribution of fees collected from transactions or other activities to tokenholders or participants in the protocol.
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The fee switch will allow governance to control and adjust fee-related policies based on the platform’s needs and objectives. Aave DAO recently greenlit alterations to staking fees for its stablecoin GHO to maintain the token’s peg. If Aave DAO proceeds with fee activation, it will emulate Frax Finance, which recently endorsed a proposal to reintroduce its fee switch.
However, on April 5, the AaveDAO discussed Dai (DAI) collateral restrictions. Risk management advisers from Chaos Labs presented a fresh proposal advocating a 12% decrease in Dai loan-to-value ratios (LTV), against Marc Zeller’s proposed a 75% reduction.
Prior to this, Ave launched a new proposal to set DAI’s loan-to-value ratio (LTV) to 0% across all Ave deployments. Additionally, the proposal recommends removing sDAI incentives from the Merit program starting from Merit Round 2 and onward. The move counters MakerDAO’s rapid D3M plan, raising the DAI credit line to about 600M DAI in a month.
Meanwhile, decentralized exchange Uniswap UNI is in the final stages of preparation for its own fee switch proposal, expected to come in mid-April following a successful temperature check.
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