According to Blockworks, Aave generated $2.1 million in daily revenue amid a wave of loan liquidations on Tuesday, based on TokenLogic data. The surge in daily revenue is attributed to liquidation fees during the recent market downturn. Aave’s v3 deployment on Ethereum alone accumulated $1.25 million in liquidation fees on August 6. Liquidations on Aave v3 totaled $234 million, including $137 million in WETH, $62 million in wstETH, and $21 million in WBTC, according to Block Analitica. The largest liquidated wallet, identified as 0x645…c4bfa, saw $73 million liquidated, accounting for 31% of the total v3 liquidated collateral.
Aave founder Stani Kulechov tweeted that the Aave Protocol withstood market stress across 14 active markets on various L1s and L2s, securing $21 billion worth of value. He noted that the Aave Treasury was rewarded with $6 million in revenue overnight from decentralized liquidations for maintaining market stability. Kulechov’s tweet of $6 million in daily revenue was based on projected revenues from liquidation fees collected during the early hours of Monday morning. TokenLogic founder Matthew Graham told Blockworks that on August 5, the Aave DAO was on track to generate over $6 million in daily revenue, driven by $1.51 million in liquidation fee revenue recorded within a seven-hour period. Aave did not respond to a request for comment by the time of publication.
Like all lending platforms, Aave generates revenue from interest fees on loans and liquidation fees. Blockworks Research analyst Luke Leasure explained that when liquidations occur on Aave, liquidators have an incentive to earn a Liquidation Bonus, which varies between 5-10% of the collateral value. A portion of this Liquidation Penalty, called the Liquidation Factor, is directed to a DAO-owned collector contract. As such, liquidations on the protocol are revenue-generating events. While the DAO will no longer earn interest revenues from these closed-out debt positions, efficient liquidations can generate substantial revenue for the protocol.
On Saturday, just before the crypto markets fell, Aave DAO passed its first temperature check on a landmark governance proposal that would begin returning protocol revenue to AAVE token holders. Marc Zeller, founder of the Aave DAO delegate, Aave Chan Initiative, stated that the governance proposal could be implemented by the end of 2024.
