Aptos AIP-119 Proposes Lower Staking Rewards to Boost DeFi Growth, Fuel Debate on Future of APT
Aptos has introduced the AIP-119 governance proposal to reduce its Layer 1 blockchain staking rewards from around 7% to 3.79% annually over the next three months. The move aims to address high token inflation and inefficient capital allocation, which have limited Aptos’s ecosystem growth compared to competitors like Sui. Currently, a large portion of newly minted APT flows to the Aptos Foundation, which controls over 90% of staked tokens, enabling outsized passive profits for some validators. The proposal also contemplates reallocating rewards to enhance network liquidity, infrastructure, and developer grants, with a six-month observation period and dedicated support for small validators to mitigate centralization risks. While supporters see reduced rewards as necessary for stimulating authentic DeFi development and increasing capital efficiency, critics worry about potential capital flight to higher-yielding alternatives such as Solana or US Treasuries and the risk of intensified selling pressure and validator exit. The proposal coincides with Aptos’s broader strategic shifts, including new leadership and increased engagement in Asian markets. The announcement triggered a 5.5% rise in APT’s price to $5.58, reflecting significant trader interest. The outcome of AIP-119 will serve as a pivotal test for Aptos’s tokenomics and competitive standing among Layer 1 blockchains.
Bullish
The immediate market reaction to Aptos’s AIP-119 proposal was bullish, as indicated by a 5.5% price increase in APT after the announcement. In the short term, traders perceive the reduction of staking rewards as a positive move toward addressing high token inflation and unsustainable validator yields, which may attract more active participation in DeFi and signal a shift toward healthier tokenomics. The reforms, including support for small validators, are likely reassuring for the ecosystem’s decentralization and long-term viability. However, there are concerns about potential capital migration to higher-yield assets, increased selling pressure, and validator centralization if not properly managed. Overall, the proposal demonstrates proactive governance and strategic adjustment, which tend to be viewed favorably in the crypto markets, especially when coupled with visible price appreciation and growing community engagement.