Aave Evolution: Umbrella Upgrade and New Aavenomics Exploration

Author: @leo_escobar_, Translated by: Sissi, Source: TEDAO

< 1. The need for change: Aave ">Challenges and opportunities

1.1 Background & Current Situation

Aave is the leading decentralized One of the most popular lending protocols, it allows users to deposit various crypto assets to earn interest, or use their assets as collateral for lending. Since its inception, Aave has achieved significant growth in both its user base and TVL (total value locked), demonstrating its reliability and innovation capabilities. However, as the DeFi ecosystem continues to evolve, Aave needs to continue to adapt to maintain its competitive advantage and address emerging risks such as sudden market downturns and potential vulnerabilities at the protocol level.

1.2 Why fundamental change is needed

Although Aave has performed well in liquidity provision and market adoption, its traditional security module model still has certain limitations in effectively managing bad debts and incentivizing governance participation. High volatility and rapidly changing market conditions can lead to liabilities that are not resolved in a timely manner, and the current staking framework sometimes makes it difficult to incentivize users to participate meaningfully. Therefore, a more powerful mechanism is needed to ensure the stability of the protocol, protect the safety of user funds, and create sustainable returns for investors and stakers. This fundamental change is at the heart of the Umbrella upgrade and the new Aavenomics design.

2. Introducing Umbrella: A new chapter in Aave risk management 2.1 Limitations of Existing Security Modules >

Existing security modules (such as stkAAVE) are designed to be secure by facilitating the creation of new security mechanisms in the event of market stress or funding shortages. Possibly slashing staked AAVE to protect the protocol. While this mechanism plays a critical role in securing the protocol, it also presents several challenges, such as: Over-reliance on governance decisions to enforce slashing , which could lead to conflicts of interest among $AAVE holders and lack a straightforward mechanism to manage bad debt in a more granular, asset-by-asset manner. 2.2 Umbrella Core Features span>

• By Asset Umbrella adopts a more targeted protection mechanism Allows stakers to stake their aTokens (certificates of deposits in Aave) into different security modules, each corresponding to a specific asset and Blockchain. This setup enables the protocol to address bad debts at the individual asset level, rather than relying on a single “one-size-fits-all” solution.

  • Automated Bad Debt Coverage

  One ​​of Umbrella’s key innovations is Introduced an automated mechanism, often referred to as the “Aave Robot”, "">The pledged aTokens can be automatically slashed and destroyed to cover bad debts. This automated mechanism eliminates the need to rely on governance proposals to decide whether to execute cuts in the event of a funding shortage, improving response speed and reducing governance-related conflicts of interest .

  • Incentive structure for stakers

  2.3 How does Umbrella improve the overall protocol stability?

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  By dispersing risks across independent asset pools, Umbrella significantly reduces systemic risk. If a particular asset generates bad debt, the stakers in the security module corresponding to that asset will be slashed to cover the loss and prevent the risk from spreading to other asset pools. This design not only enhances overall stability, but also allows for more granular control over risk parameters and ensures that incentives are always aligned with market conditions for each asset. 3. New Aavenomics: Fee Switch 3.1 Transition from stkAAVE to Umbrella Staking

  With the introduction of Umbrella, the traditional model of staking $AAVE on a single security module is changing. While $AAVE staking still exists, its primary function is no longer to bear all the risks of the protocol, but to become a Auxiliary components, focused on governance and benefit from a distribution of the net proceeds of the Agreement. At the same time,the pledge module divided by assetsOne ​​of the major changes to Aavenomics is how the protocol’s net revenue is redistributed. The agreement is based on the interest rate differential between the lending and borrowing rates. Generates net income and adopts a "Buy & Distribute" mechanism, where a portion of the net income will be used to repurchase $AAVE on the open market and distributed to stakers to enhance the value of $AAVE Claim. In addition, stakers of the Umbrella module can also receive aTokens and other rewards linked to the performance of each reserve asset.

  3.3 Introducing $anti-GHO: A new mechanism for GHO borrowers

  Under the new Aavenomics system, the $GHO borrowing discount mechanism enjoyed by $AAVE stakers has been replaced It is an “anti-GHO” mechanism. Borrowers who pledge $AAVE will accumulate non-transferable “anti-GHO” over time. ” tokens, which can be used to offset or “burn” part of the $GHO debt. This system provides real economic benefits to AAVE stakers while avoiding distorting effects on the broader market.

  3.4 Governance and decision-making mechanism under the new model

  While governance remains critical,. Aave DAO Still in ControlParameter Adjustment (such as reserve factors, incentive ratios) and strategic decisions (such as protocol expansion, new asset launches, etc.) . This approach strikes a balance between automation and decentralized governance, improving the efficiency of protocol operation. /span>Efficiency and transparency.

  

  The following two articles from @0xboca,about Umbrella upgrades and the new Aavenomics are also worth reading and referring to.

  https://x.com/0xboka/status/1878813433036169289

  < p style="text-align: left;">https://x.com/0xboka/status/1882568334908268893

  4. Thinking

  Aave has proven through this upgrade that even industry-leading platforms can continue to< strong>evolution, instabilityanduser benefits, setting an example for other protocols Important precedent. If these initiatives are successfully implemented, they will further demonstrate the strong governance framework. ="">、Reasonable token economicsandactive community involvementHow to work together to push the boundaries of decentralized finance forward.

  Original title:Aave's Umbrella and New Aavenomics