Aave is DeFi’s largest lending network, handling tens of billions of dollars across various chains. Users can earn interest by supplying assets to the lending market, or borrow against their collateral from across multiple eligible assets.

In DeFi, incentivization is key to attracting liquidity and keeping markets active and efficient, even for an industry leader like Aave.

By mid-2024, the Aave Chan Initiative (ACI), one of the main driving forces behind the Aave protocol, launched the Merit incentive program to encourage users to choose Aave over other lending protocols. At that stage, Merkl was used solely as a partner for distributing ETH and GHO rewards, while the detection of user activity to be rewarded was managed directly by the ACI.

However, maintaining a full incentive indexing infrastructure requires significant technical resources and ongoing operational effort.

The ACI and Aave realized they needed a battle-tested partner capable of managing incentives at scale, while tailoring the reward mechanisms to the specific rules and requirements of each protocol using Aave as a lending market.

Having already worked together, the ACI naturally turned to Merkl, not only for reward distribution but also to handle indexing (tracking onchain user activity).

Merkl is the only incentive platform capable of operating at such scale, tracking the DeFi activity of thousands of users across multiple chains, and distributing multiple token rewards simultaneously.

Merkl is also uniquely positioned to meet the specific incentive requirements of Aave’s client protocols. Protocols that use Aave as a lending and borrowing market often have tailored conditions to maximize the impact of incentive programs, for example, distributing rewards only to users above a certain health factor or excluding those who both deposit and borrow at the same time.

Key incentive programs powered by Merkl in collaboration with the ACI notably include:

• Ethena’s Liquid Leverage program: Merkl distributes rewards to USDe holders depositing on Aave under specific conditions, and also powers Ethena’s USDtb market on Aave.
• Tydro, Ink’s native lending protocol powered by Aave: Merkl has been providing rewards since the protocol launch. Users supplying assets on Tydro automatically accrue Ink points in real time, with all reward calculations and distributions handled by Merkl.
• Plasma launch: Merkl plays a central role in managing all of the chain’s incentives, including those for Aave markets. Just four days after launch, over $6.5B had been deposited into Aave on Plasma, making it the second-largest Aave deployment in under a week.

As part of this partnership, Aave integrated the Merkl API, enabling real-time display of Merkl reward APRs directly within the Aave app. This allows users to see their potential earnings clearly without switching between Aave and Merkl, providing a consolidated APR with a detailed breakdown of both the protocol APR and the additional Merkl reward APR.

Merkl plays a key role in Aave’s growth today.

It has saved the ACI significant time, as they no longer need to maintain the infrastructure of an incentive program themselves. Thanks to Merkl, the ACI and Aave now have access to a broader range of incentive designs with unprecedented customization options.

At the time of writing, around 20 incentive campaigns powered by Merkl are live across Aave markets, spanning multiple networks and asset types, distributing ~$500K in rewards per day to users supplying or borrowing on the protocol.

Thanks to the collaboration, reward APRs are now displayed natively within the Aave app. This allows any protocol launching an incentive campaign through Merkl to automatically show its rewards to the entire Aave user base, boosting both visibility and engagement.

In total, over $65M in rewards have been distributed to Aave users through Merkl, across a wide range of campaigns and markets, making the Aave Chan Initiative (ACI) one of Merkl’s largest and most strategic partners.