The largest protocol in DeFi, the Aave decentralized autonomous organization (DAO), has officially green-lighted a $1 million token buyback initiative set to commence on April 9.
The proposal garnered 439,000 votes in favor, surpassing the 320,000 votes needed for a quorum, with only 2,020 votes opposing it.
This initiative is part of a larger strategy to enhance Aave’s tokenomics and ensure alignment with the protocol’s long-term incentives.
Simultaneously, this development comes amid a notable decline in AAVE’s market price. Based on data from CryptoSlate, the token has seen a nearly 21% drop over the past 24 hours, trading at around $120 at the time of this writing.
In light of this, Marc Zeller, founder of the Aave Chan Initiative (ACI), remarked:
“DAO buybacks will represent 2.5% of [AAVE’s token] supply by the end of the year.”
First phase to kick off with $4 million allocation
The newly approved proposal introduces significant updates to Aave’s financial governance structure. It establishes the Aave Finance Committee (AFC), tasked with overseeing treasury management and implementing buyback activities.
The first phase provides the AFC with $4 million in aEthUSDT to facilitate roughly one month’s worth of AAVE token buybacks. However, the overall initiative aims to repurchase up to $1 million worth of AAVE each week over the span of six months.
This phased strategy allows the protocol to finalize the rollout of an updated Aave Swapper contract, which will automate future buybacks. It also enables the DAO to track and adapt the program according to performance and market conditions.
Built-in safeguards ensure that no direct token transfers will occur from the treasury, with all expenditures remaining within governance-approved budgets. This promotes transparency while allowing for timely actions.
Meanwhile, Zeller hinted that the six-month timeframe might be extended.
He referenced earlier initiatives like Merit, initially planned for a six-month duration but has since continued for over a year. He suggested that similar extensions might occur if the buyback proves successful.
He noted:
“Buybacks are a permanent initiative; the rate is merely what the DAO has approved to start conservatively over the next 6 months. Just like Merit, we started at six months, and now we are celebrating the 16th month of the program, it will be renewed.”
