Connect with us on social media platforms. A potential initiative is being discussed at the decentralized lending platform Aave (AAVE), considering the activation of a 'fee switch' to distribute fees to holders. Marc Zeller, founder of the Aave Chan Initiative, shared this on the X social platform.

Zeller mentioned, "Temp check to activate 'fee switch' next week," after observing that the Aave decentralized autonomous organization (DAO) currently generates approximately $60 million in annual net profits, equivalent to five years of operational expenses.

Aave is a cryptocurrency lending platform that operates across various blockchain networks, enabling borrowers to take out loans in one cryptocurrency while using another as collateral. Governance of the platform is conducted by holders of the Aave token, collectively forming AaveDAO.

In a previous post on the X social platform, Zeller hinted at the potential implementation of fees for Aave stakers. On March 16, he stated, "A new iteration of the safety module will suggest distributing fees to stakers."

A "fee switch" typically refers to a feature within a system or platform that allows for the activation or deactivation of specific fees or charges. In decentralized finance (DeFi) protocols like Aave, a fee switch could facilitate the distribution of fees collected from transactions or other activities to tokenholders or protocol participants.

The fee switch will enable governance to regulate and adjust fee-related policies based on the platform's requirements and goals. Aave DAO recently approved modifications to staking fees for its stablecoin GHO to maintain the token's peg. If Aave DAO proceeds with fee activation, it will follow the example of Frax Finance, which recently supported a proposal to reintroduce its fee switch.

However, on April 5, AaveDAO discussed collateral restrictions for Dai (DAI). Risk management advisors from Chaos Labs presented a new proposal advocating for a 12% reduction in Dai loan-to-value ratios (LTV), contrasting with Marc Zeller's proposed 75% reduction.

Previously, Aave launched a proposal to set DAI's loan-to-value ratio (LTV) to 0% across all Aave deployments. Additionally, the proposal suggests removing sDAI incentives from the Merit program starting from Merit Round 2 onwards. This decision counters MakerDAO's rapid D3M plan, which aims to increase the DAI credit line to approximately 600M DAI within a month.

Meanwhile, the decentralized exchange Uniswap (UNI) is in the final stages of preparation for its own fee switch proposal, expected to be introduced in mid-April following a successful temperature check.