Aave Proposal Projects $3.5 Million in Added Annual DAO Revenue

TokenLogic’s proposal to change reserve factors across 54 reserves projects about $3.5 million in additional annualized Aave DAO revenue, with lower supplier yields in affected markets.

The proposal covers 12 Aave V3 instances and the Ethereum V2 market. TokenLogic’s estimate uses balances and interest rates from Nov. 9, and the proposal was posted Nov. 12. The projected revenue is based on that snapshot, not realized results.

A reserve factor determines how borrower interest is split between a protocol’s treasury and suppliers. The proposed changes would raise the blended reserve factor from 12.0% to 12.7%. TokenLogic says the parameter changes would not directly alter the rate borrowers pay, but suppliers would receive a smaller share of interest in affected markets.

Avalanche accounts for an estimated $1.20 million in additional annual revenue. The proposal projects supplier annual percentage yield reductions of 61 basis points for USDC, 78 basis points for USDt and 173 basis points for DAI.e.

On Ethereum Core, TokenLogic proposes raising DAI’s reserve factor from 25% to 30%. The change is estimated to reduce supply yield by 17 basis points and add $217,486 in annual revenue.

The largest individual estimate is for USDT0 on Plasma, at $1,036,635 a year. It is based on $632,468,070 in borrowing balances in the Nov. 9 snapshot. TokenLogic plans to include this change in an Aave Improvement Proposal only after finalizing terms with the Plasma team.

For Ethereum V2, where reserves are frozen to new supply and borrowing, the proposal would raise reserve factors on assets that remain borrowed to 99.99%, from 85% or 90% for WBTC. TokenLogic estimates the changes would add $152,574 in annual revenue. It also warns that lower supplier yields could prompt withdrawals, potentially raising utilization and borrowing rates and encouraging existing positions to close.

The changes have not been approved. TokenLogic listed community feedback and advancement to the AIP stage as next steps, and disclosed that it is an active service provider to the Aave DAO.