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Aave Teases Cross-Chain, Layer 2 Plans in V3 Proposal

The decentralized lending protocol is planning new features for its next upgrade.

Aave Teases Cross-Chain, Layer 2 Plans in V3 Proposal
Shutterstock photo by Prostock-studio

Key Takeaways

  • Aave has announced the next update to its DeFi lending protocol, V3, and the features that will accompany it.
  • The upgrade will most notably include support for multiple blockchains and support for layer 2 networks.
  • It will also include various improvements related to user experience, risk management, and the token listing process.

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Aave has published an update describing V3 of its protocol and the new features that will be included in the update.

V3 Will Have Layer 2, Interoperability Features

Aave’s latest post suggests that its V3 update is “poised to create the next generation Layer-0 DeFi protocol,” noting that this will improve user experience, capital efficiency, decentralization, and security.

The update will introduce several notable features, including support for various Layer 2 networks on Ethereum. The project says that this will “improve user experience and reliability.” Presumably, the feature will reduce fees and transaction times by avoiding the need to move funds on Ethereum’s frequently-congested network.

V3 will also include a cross-chain feature called Portal that allows assets to be moved between Aave deployments on different networks, including Ethereum, Solana, Polygon, Fantom, and others.

Even More Features In V3

Another upcoming feature is a high-efficiency mode. This will help users get the highest borrowing rates and yield generation, automatically optimizing users’ investments without requiring them to seek out the best opportunities.

The update will also decentralize the listing of new assets, allowing Aave governance to grant various entities the right to list assets on the platform through an on-chain vote. Currently, on V2, listing a new asset on Aave requires a lengthy proposal process.

Finally, the upgrade will create risk management improvements, such as isolation mode, which introduces debt ceilings. It will also introduce supply caps, borrowing caps, various other limitations that can be set by governance members and administrators.

Aave Is the Second Largest DeFi Platform

Aave is currently the second-largest DeFi platform by total locked value, according to the metrics site DeFi Pulse. The platform currently has $13.8 billion locked in its contracts.

In addition to providing a deposit and borrowing market, the platform is best known for powering Aavegotchi—a series of non-fungible tokens featuring a ghost mascot.

The project has not yet announced when V3 will go live.

Disclaimer: At the time of writing this author held less than $100 of Bitcoin, Ethereum, and altcoins.

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