Aave V3 now alive on the Ethereum mainnet. With this upgrade, WBTC, WETH, wstETH, USDC, DAI, LINK, and AAVE are the only supported assets.
Aave V3 Improves Capital Efficiency
Stani Kulechov, co-founder of Aave, said that V3’s flexible design introduces new ways to reduce risk, lower gas costs, and improve capital efficiency, all while ensuring better liquidity decentralization.
Aave Protocol V3 is now live on the Ethereum market 👻
“The most exciting aspect of V3 is its flexible design, which enables a variety of new risk mitigation features, and improved capital efficiency & decentralized liquidity – all while reducing gas costs.” @StaniKulechov pic.twitter.com/QsSnnlhEMr
— Aave (@AaveAave) January 27, 2023
This upgrade comes after the Aave community delayed the upgrade. Then, the Aave developers thought that directly increasing the V2 Pool to V3 would not produce the desired level of compatibility with other Aave V3 pools running on the Avalanche, Polygon, and Ethereum layer-2 platforms.
Aave V3 now on Ethereum has been reworked. It is neglected Complex and more compatible with other Aave V3 pools outside of Ethereum.
The transition to Ethereum, expanding Aave’s presence on the top block, does not directly affect the total value locked (TVL). The data shows that it is 2% lower in the last 24 hours. However, TVL was up 24% last month, rising to $4.56 billion as of writing on January 27, according to data streams from DeFilma.
Aave is currently the fourth largest DeFi protocol by TVL, passing Lido Finance, MakerDAO, and Curve. However, dApp is the second largest lending protocol by TVL, after MakerDAO. With its launch on Ethereum, and an upgrade from the original V2, the TVL protocol could gradually improve over the coming weeks or months.
This, in turn, may have a positive impact on AAVE prices.
Aave is a decentralized money market, allowing crypto holders to actively lend and borrow various assets. V3 integration on Ethereum uses protocols on six other platforms, including Avalanche, Polygon, and Harmony. Polygon is compatible with the Ethereum virtual machine, which exists as a layer-2 protocol that allows for higher scalability and lower trading costs.
What Aave V3 Brings
Developers claim Aave V3 introduce various changes that, as the co-founder said, make debt and debt more tidy and cheaper.
According to the protocol, this version is optimized to reduce gas costs by around 20-25% on board. Users can also move assets across all Aave markets, regardless of network. By launching on Ethereum, Harmony users, for example, will be free to transfer assets and participate in the Aave V3 market on the most active platform.
Aave V3 introduces “Isolated Mode” where the Aave administration can choose to list new tokens as isolated assets with a certain debt ceiling. Aave explained that the loan ceiling is the maximum USD reading that can be guaranteed by the borrower. Only approved tokens, usually stablecoins, can be borrowed in this mode.
Feature images from Canva, Charts from TradingView