Aave V3 Depositors Can Pocket Avalanche Token Rewards

Token rewards for in-app deposits are in a state of flux.

DeFi 2.0 was expected to provide an alternative for paying out tokens in exchange for deposits. Compound Finance may cut rewards. In other parts of DeFi, the money is still flowing.

Case in point: Luigi D’Onorio DeMeo, head of DeFi at the Ava Labs, announced on April 20 that AVAX token incentives will be available for depositors in Aave’s V3. AVAX is the native token of the Avalanche blockchain network.

Avalanche and Fantom

Ava Labs is the primary company developing the Avalanche blockchain’s ecosystem. Lending protocol Aave launched its V3 last month on both Avalanche and Fantom.

Patrick Sutton, vice president of PR and communications at Ava Labs, told The Defiant that the AVAX rewards were part of Avalanche Rush, a $180M incentive program launched last August. The rewards aren’t eye-popping by DeFi standards — as of April 20, the highest APY offered is 9.94% for people who deposit AVAX (and earn AVAX rewards on top of that). Among stablecoins USDT provides the best APY with 6.44% with over half of that coming from the AVAX incentives.

Jump in Deposits

Of course those yields are highly variable and have been diluted in the past day as more users supply liquidity to Aave’s V3 deployment on Avalanche — a tweet by Stablecoin Yields on Apr. 19 shows yields of 61% for USDT, above 38% for DAI, and over 17% for USDC.

Indeed, data provider DeFi Llama shows an jump in deposits into Aave V3 deployment on Avalanche — total value locked jumped from $6.39M on Apr. 19 to $1.01B. That’s well over a hundred fold increase in a day, which shows how responsive the market is to incentives (and how quickly the resulting yields get diluted).

TVL of Aave’s V3 on Avalanche. Source: DeFiLlama

Aave itself shows a much higher number, $3.33B for TVL in its Avalanche V3 deployment. Regardless of the precise number, it’s noteworthy how quickly DeFi users shift around liquidity to take advantage of rewards.

Most of the money doubtless came from Aave’s V2 deployment on Avalanche, which is no longer rewarding depositors — TVL for that version of Aave dropped 43.99% to $2.65B in the last day as of April 20 and according to DeFi Llama.

Affinity for Avalanche

Now at $4.21B, Aave V3 stands as the No. 1 ranking DeFi protocol in TVL terms on Avalanche, according to DeFiLlama. Despite the near-50% drop, Aave’s V2 on the chain ranks second at the $2.65B mark.

Benqi, another lending protocol native to Avalanche, sits in third on the blockchain in TVL terms at $1.61B.

Aave has shown an affinity for Avalanche — outside of Ethereum and Polygon (which bills itself as an “Ethereum scaling platform”), Avalanche is the only blockchain to which the lending protocol has deployed both its V2 and V3.

With Avalanche users with more value sitting in the two versions of the protocol, it appears the feelings are mutual — though of course, incentives make that easier.