Staking consists of depositing your AAVE tokens within the protocol Safety Module. The purpose of staking is to act as a mitigation tool in case of a shortfall event. As an incentive for this, Safety Module stakers will receive Safety Incentives in the form of stkAAVE tokens.
The Safety Module solves the issues with traditional staking systems and market liquidity: Tokens with locking/reward schemes tend to suffer from low market liquidity and extreme volatility when high percentages of the total supply are being locked. With the ability of contributing to the SM not only by locking AAVE, but also by contributing with liquidity into an AMM, stakers create a trustless and decentralized market with deep liquidity for trading AAVE against ETH. In the case of a shortfall event, the Safety Module uses up to 30% of the assets locked to cover the deficit.
To stake your AAVE in DeFi Saver dashboard, open the [STAKING] tab within the Aave dashboard, input the amount of AAVE you have at your disposal to stake and click on STAKE. You'll then proceed to send 2 transactions:
- Approve: This is a required transaction prior to the staking that allows the staking contract to move your AAVE tokens. This transaction won't be required if you perform additional staking actions unless you revoke the approval.
- Stake AAVE: This transaction performs the action to stake AAVE tokens. When confirmed, your tokens will be staked in the Safety Module.
In the staking tab you can also see previously accrued rewards from supplying and borrowing by using Aave protocol together with those acquired from staking.