Aave had plans to launch the third version of its crypto lending protocol on Ethereum. The process has begun with the successful voting in favor of the new version. The new change has been called a critical moment for the DeFi community. As the mentioned change takes place, the DeFi community will benefit from the various aspects of the new change like risk management and capital efficiency.
Aave Protocol was launched in 2017 and since then two iterations have been implemented. The developers have continued to work on its enhancement. They have already implemented the new version on various chains. Ethereum holds key importance for the lending platform because of its being the largest market for lending and borrowing capital.
Here is a brief overview of the new developments regarding Aave V3 and the changes it would bring.
Aave set to launch V3
Aave developers prepared the new update for implementation recently. A crucial step in the implementation of the new update was approval from the DAO. Though the new version was deployed on various networks, the Ethereum version was still running on V2. The alternative for the developers was an upgrade to V2.
If V2 were upgraded, it would have led to problems. The decision for upgradation to V3 was for increased compatibility and less general complexity. The voting for the deployment of V3 was set to end on 25 Jan 2023, 18:58 UTC. As the proposal has been accepted by the community, its deployment will be complete on Friday, 27 January.
The new development has come in a situation when Aave has charged as the largest lender. The collapse of various big names and the problems has led it to the forefront. It has the leading position as it has $5 billion in total value locked in the Ethereum ecosystem. Ethereum DeFi players have hailed this new change, especially those who plug into Aave for liquidity.
Developments related to Aave V3
According to official sources, the new version will support seven assets. These include Wrapped Bitcoin, Wrapped Ether, Wrapped staked Ether, USDC, DAI, LINK, and AAVE. The mentioned assets were proposed by DeFi risk manager Chaos Labs. As the new changes take place with the deployment of V3, the pricing of all assets except two will come from a Chainlink feed.
The exceptions include Wrapped Bitcoin and Wrapped Ethereum. The mentioned two have been excluded because of their reliance on price adapter smart contracts. Furthermore, Aave V3 will come with eMode activated. The mentioned mode allows features like maximum capital efficiency for collateral and high price correlation.
Users have lauded it as a big step that will prove to be of great significance for the Ethereum DeFi space. However, there is one key thing to be noted. Not everything will change instantly with the deployment of the new version. Instead, it will take time for the changes that have been told.
Expansion of multi-chain approach
The deployment of the new version of Aave is seen as the expansion of the multi-chain approach. As said above, the new iteration has been launched on multiple networks. The networks on which V3 has been deployed include the following.
- Avalanche
- Optimism
- Polygon
- Fantom
- Harmony
- Arbitrum
As Ethereum is the largest ecosystem for Aave, its developers have focused their energies on it. The users would have the option of going from V2 to V3. BGD Labs is making efforts to work on a tool that will ease the migration process for users. The developers have assured the users that the new version has been tested for correctness.
Conclusion
The Aave community has voted in the favor of new version, i.e., V3 for Ethereum. The mentioned version was being used on various chains previously. V3 was first launched in March 2022 and now there was a need felt to implement it in the biggest ecosystem of Ethereum. Several changes are expected to be rolled out with the deployment of the new version. Though these changes won’t take place immediately, rather the process will be gradual.
