Deposit tokens and earn rewards.
Learn about Aave Staking
How to stake AAVE?
There are several ways to earn a return on your AAVE, including lending them out to custodial providers or through decentralized lending protocols, supplying liquidity on the Aave protocol, or staking your tokens on the platform.
We recommend using a Ledger Hardware Wallet to keep full control over your funds. To stake your tokens, you should ensure you have your AAVE tokens on your Ledger and follow the steps below.
Step 1: Go to the Aave Staking Dashboard.
Step 2: Under ‘Stake AAVE’, select ‘Stake’, input the amount to stake, and click on ‘Approve to continue’ to confirm the transaction in your wallet.
Step 3: Once approved, click on ‘Staked’ to finalize the transaction in your wallet.
Do I need to maintain my staking in any way?
Once you have staked your AAVE, there are things you need to consider going forward:
- To unstake on the Aave Staking Dashboard, click on “Cooldown to unstake.” Keep in mind that there is a 10-day cooldown period before you can unstake. Once the cooldown period is over, you have a 2-day window to unstake. If you do not unstake during that time, you will need to reactivate the cooldown.
- During the 10-day cooldown period, you have the option to stake more AAVE tokens in the Safety Module or receive stkAAVE. However, receiving stkAAVE will lengthen your cooldown period based on the amount received. If the amount is significant, it will reset your cooldown period and you will need to reactivate it before you can unstake.
- As a participant in the Aave protocol, you have the ability to vote on Governance Proposals once you have staked your tokens. Your contribution and vote are valuable to the protocol, but it does not affect the sum of your rewards.
How are the rewards generated?
All rewards accrue in real-time and are distributed as AAVE is withdrawn or transferred from the Safety Module.
Native staking rewards for AAVE are composed of:
Token Inflation: The Aave protocol incentivizes stakers with Safety Incentives (SIs) tokens. Currently, there are 1100 AAVE/day to be distributed among stakers. The allocation of SIs should be voted on before the end of the 3-month distribution schedule. If a vote on a new allocation plan is not held or is held late, the current allocation will continue until a vote is held or until the Aave Reserve (3 million) is depleted. Keep in mind that your token rewards are subject to the results of the quarterly votes.
Protocol Fees: In addition to Safety Incentives, stakers can also earn trading fees from the Aave protocol in the future. However, at the moment, stakers can only receive AAVE tokens as rewards. Any implementation of fee rewards would be subject to future governance changes.
It’s important to keep in mind that the total annual rewards are divided among all active stakers. As the number of staked tokens increases, the reward rate decreases. Furthermore, there are governance proposals that could adjust some of the on-chain parameters, which could also change the APR if they are approved.
You’re welcome to use our Staking Calculator to get a better understanding of how these factors can impact your rewards.
What are the risks of staking AAVE?
We strive to make staking as safe and transparent as possible, however, it’s important to consider factors that may influence whether a particular staking option is appropriate for you.
- Slashing risk: A shortfall event in the Aave Protocol occurs when there is a state of deficit for the liquidity providers. In the case of a shortfall event, part of the staked AAVE are auctioned on the market to be sold against the assets needed to mitigate the occurred deficit. In such a case, the Safety Module may use up to 30% of the staked AAVE tokens to cover the deficit. Also note that this is subject to changes as the interpretation of a shortfall event is subject to governance.
- Token issuance event: In the case of a shortfall event, the amount seized from the Safety Module may not be enough to cover the whole debt, then an ad-hoc AAVE issuance event is triggered called Recovery Issuance. The issued AAVE tokens are also used to cover the deficit, which may lower the token price significantly.
- Unbonding risk: The cooldown period for AAVE is 10 days by default. Crypto markets are highly volatile, and investors need to be aware that they cannot sell their tokens immediately once they have staked them. They first need to wait 10 days for the tokens to unbond before they become liquid. Please take note that the cooldown period can be further extended by the governance. Consider keeping funds liquid if you do not intend to hold AAVE long-term.
- Protocol security risks: There is an inherent risk that the protocol could contain unknown bugs, this risk applies not only to staking but also the investment in AAVE.
This list is not exhaustive and other risks may apply.
What is AAVE?
AAVE is the native token of the Aave protocol that is used to carry out the key functions of the platform as detailed below:
- Staking: Users can stake AAVE in the contract to contribute to the security of the Aave protocol. Staking consists of depositing your AAVE tokens within the protocol called Safety Module. The purpose of staking is to act as a mitigation tool in case of a shortfall event and stakers are incentivized with various staking rewards including AAVE tokens.
- Governance: You can use both AAVE and stkAAVE (Staked AAVE) tokens to vote on proposals. The amount of both tokens will be summed up in your voting, which will determine your voting power. Although you can move your tokens as long as the amount in the wallet used to vote remains equal or higher than the tokens used to vote. This means reducing your token amount to lower than the number of tokens used for voting would cancel your vote.
What are the tokenomics of AAVE?
The supply of AAVE is capped at 16M, of which 13M are redeemable by LEND holders with a ratio of 100 LEND per 1 AAVE. The remaining 3M will be allocated to the Aave Reserve and controlled by the AAVE token holders, to incentivize the Aave Ecosystem growth and development. Among the 3 million token allocations, the token emission rate is 3 million AAVE tokens per day currently, which is subject to a quarterly vote.
Initial Token Distribution Breakdown
Any tokens that have been minted are free to be used and staked. The initial token distribution breakdown is as follows:
- Redeemable by LEND holders: 81.25%
- AAVE Reserve (AAVE holders): 18.75%
From the Staking Rewards Journal