A proposal seeking to implement a new aToken primitive called “Staked aTokens” has been passed by the Aave DAO. Moving forward, Aave will be able to participate in Vote-Escrowed economies.
Pioneered by Curve Finance, the vote-escrowed model allows token holders to decide on a lock-up period for their tokens. Holders who lock up their tokens for a longer period typically enjoy better benefits in governance voting and staking rewards.
As per the proposal, the Staked aTokens would allow Aave to use “Liquidity Provider (‘LP’) tokens from ve-based protocols, like Balancer or Curve, as collateral while participating in those protocols’ ecosystems.” Users will be able to lock their LP positions in any of these protocols to increase their rewards. In particular, the Aave DAO Treasury could generate revenue from staking rewards, as well as participate in the veToken economy.
This brings a new wave of strategies like leveraged LP positions which can increase user rewards greater than the 2.5x limit and tap into the stability of listed stablecoins.
Over 99% of the community voted in support of the motion. The next steps will entail creating a proposal in BalancerDAO to “present the built implementation and ask to be allowlisted.” Another Snapshot will be taken for the community to choose where the newly accepted collateral type would be listed. There will also be another proposal in Aave DAO for the listing of an initial set of BPT assets based on community discussion, as well as to deploy treasury BAL and ETH and provide a reward boost to Aave BPT suppliers.