Aave proposal would cut Polygon DAI lenders’ interest share

Aave proposal author TokenLogic has proposed raising the reserve factor for Polygon V3 DAI from 25% to 70%. The reserve factor is the share of borrower interest allocated to the DAO rather than suppliers. The change would leave Polygon DAI suppliers with 30% of borrower interest, compared with 75% now, without directly changing Aave’s borrowing-rate curve.

TokenLogic estimates that the Polygon change would reduce suppliers’ annual percentage yield by 2.70 percentage points and generate about $94,373 in additional annualized DAO revenue. The estimate uses balances and interest rates recorded Nov. 9 and assumes they remain unchanged.

The proposal covers 54 reserves across 12 Aave V3 deployments and Ethereum V2. TokenLogic estimates the listed changes could generate about $4 million in additional annualized DAO revenue.

The projected effect varies by reserve. TokenLogic models supply-yield reductions of 1.73 percentage points for Avalanche DAI.e, 0.78 percentage points for Avalanche USDt and 0.61 percentage points for Avalanche USDC. Their proposed reserve factors are 90%, 25% and 25%, respectively.

An Aavescan snapshot taken at midnight UTC on Nov. 12 recorded 3.30 million DAI deposited in the Polygon pool and 2.65 million DAI borrowed. The pool had a 4.81% supply annual percentage rate before historical incentives. That observed rate and TokenLogic’s modeled reduction use different dates and calculations.

The proposal includes reserve factors of up to 100% for selected bitcoin-wrapper and liquid-staking collateral reserves. TokenLogic estimates the reduction in lending yield for those reserves would be about 1 to 2 basis points because their lending rates are already close to zero. The reserve factor applies to lending interest, not deposit principal or the staking accrual reflected in liquid-staking token values.

Plasma USDT0 is modeled to generate about $1 million in additional annualized DAO revenue. Its reserve factor would increase from 5% to 7.5%, while the projected supplier-yield reduction is 0.16 percentage points against about $632 million in borrowed funds. Its inclusion remains conditional on finalized Plasma terms.

For Ethereum V2, TokenLogic proposes raising the reserve factor on five remaining borrowed reserves to 99.99%. The proposal states that lower supplier returns could lead liquidity providers to withdraw funds. That could increase utilization and borrowing costs, which may encourage borrowers to close positions.

The revenue figures are fixed-input estimates, not execution results. Changes in liquidity, utilization, borrowing rates or supplier behavior could affect realized DAO revenue and supplier returns. The listed next steps are feedback and escalation to the Aave Improvement Proposal process.