Aave eyes fee switch amid DeFi network dominance

Leading DeFi protocol Aave plans to enable a Fee Switch for its users, distributing part of its revenue to its token holders. The lending platform founder, Stani Kulechov, disclosed this in a post on X, stating, “Fee switch incoming.”

The statement follows a report that the Aave treasury, excluding its AAVE tokens, has surpassed $75 million, a sign of the protocol’s robust performance. Talks of a fee switch for Aave are not new, with the Aave DAO having a temperature check on the issue in 2024.

With many people supporting it at the time, the platform appears ready for the final governance proposal to be implemented. A fee switch returns value to the protocol users by allowing the platform to distribute parts of its revenue to its ecosystem participants.

Unsurprisingly, the idea of a fee switch is something many people endorse as they believe it would make holding the AAVE token even more beneficial. At the time of the temperature check, Aave Chan Initiative founder Marc Zeller noted that the proposal to enable a fee switch could initiate restaking on the Aave protocol.

With the fee switch now looking more likely than ever, many crypto enthusiasts believe it would be great for Aave and DeFi. Interestingly, other leading DeFi protocols, including Uniswap, have considered enabling the same mechanism.

Aave net deposits increased by $25 billion in 2024

Meanwhile, Aave’s decision to opt for a fee switch is unsurprising, given how successful the protocol has been. The lending platform is one of the best-performing DeFi protocols based on several metrics, including its total value locked (TVL). DeFiLlama data shows it has $21.63 billion in TVL, which has increased by 5.5% in the last seven days.

However, Aave’s net deposits stand out. The protocol saw its net deposits increase by $25 billion within 2024, going from $10 billion as of 2023 to $35 billion by the end of last year. According to Token Terminal, its net deposit has surpassed $36 billion, making it the largest DeFi protocol.

Part of Aave’s success has been due to the struggles of other leading DeFi protocols, such as Curve, with its massive outflows, and Sky, formerly Maker, with its complex restructuring plans. Still, Aave had to compete with several other lending protocols, such as Morpho Labs, Compound, and Spark.

Beyond its net deposits, the protocol also has the largest active loans, at $14.99 billion, and has collected around $500 million in total fees over the last 12 months.

What is next for Aave

Despite the news that Aave will enable a fee switch, the AAVE token did not see any sizable changes in its price. This indicates that the market has not yet priced in the announcement. Still, the token has been highflying in recent weeks, gaining more than 35% in the last 30 days to reach $352.

It is currently among the top 30 cryptocurrencies by market cap, and many believe that it could see more substantial growth in 2025. This is highly likely, given the protocol’s planned expansions.

Currently, Aave has 13 markets across 11 chains. In 2025, it plans to add six new chains, including Mantle, Aptos, Sonic Linea, BOB, and Spider Chain. It is also planning to expand its GHO stablecoin, which currently has a market cap of around $150 million, to the Avalanche and Base Layer 2 networks to boost its usage.

The protocol is now targeting the development of the Aave V4 as part of its Aave 2030 plan. The V4 will offer improved modularity, capital efficiency, and more innovations.

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