Aave’s Token Buyback Plan Approved, AAVE Faces Price Struggles

Aavenomics, the highly anticipated proposal to modify Aave protocol's tokenomics and introduce token buybacks, has officially passed

The Aave DAO has reached quorum for the Aavenomics proposal, securing more than 427,000 votes in favor.

The Aave Chain Initiative (ACI) founder Marc Zeller announced on April 7 that the Aave DAO had reached quorum for the Aavenomics proposal.

The proposal, which was put forth by ACI founder Marc Zeller, aims to modify Aave protocol's tokenomics and introduce token buybacks.

The proposal had reached an overwhelming majority with 427,126 yes votes and 1,963 no votes, well beyond the required 320,000 votes.

"This is a new era for Aave- 1m$ / week buybacks financed by protocol profits starting on Wednesday," Zeller noted.

The token buyback plan is experimental and will initially run for six months.

During this period, the Aave protocol will allocate part of its profits to buy $1 million worth of AAVE tokens each week.

Given the recent dip in crypto asset prices, this means the protocol could purchase more tokens than anticipated, allowing it to reduce the circulating supply significantly.

By the end of the year, Aave expects to have bought back 2.5% of AAVE’s total supply.

Zeller clarified that the six-month duration is just a pilot phase. The DAO intends for the buyback program to continue indefinitely, with the current $1 million per week rate being a conservative start.

"Buybacks are forever, the rate is just the one the DAO has voted for the next 6 months to start slow & at a conservative rate."

Aave remains one of the dominant DeFi protocols, with a TVL of around $20 billion and presence across multiple blockchains.

However, the buyback strategy, if successful, may boost Aave’s value in the long run.

But for now, AAVE’s price is under pressure.

In the last 24 hours, AAVE fell 18%, reaching lows of $115 before recovering to $121.

The price decline is surprising considering the buyback news. Usually, such initiatives are seen positively by the market as they reduce the token's circulating supply and increase buying pressure, leading to a potential price increase.