DeFi lending protocol Aave developer Aave Labs has revealed its ambitious roadmap for the protocol’s future evolution.
The firm published a proposal on May 1 2024 that outlines plans to upgrade the protocol to its next-generation version 4, with a focus on significant enhancements and expansions to the Aave Network.
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The proposed “Aave V4” is slated to be constructed on an entirely new architecture, featuring a “Unified Liquidity Layer” designed to streamline the integration of key features such as isolation pools, risk modules, and the platform’s native stablecoin, GHO, which was launched in July 2023.
A standout feature of Aave V4 is the implementation of interest rates that can dynamically adjust based on real-time market conditions, facilitated by data from Chainlink oracles.
The proposal also addresses the improvement of Aave’s algorithmic stablecoin, GHO, which has faced challenges in achieving market traction compared to leading competitors like Tether (USDT) and USD Coin (USDC). Key enhancements to GHO include upgrades to the liquidation engine, such as variable liquidation bonuses and “soft” liquidations, as well as enhanced integration options for interest-earning capabilities.
In addition to these core upgrades, the proposal outlines plans for a cross-chain liquidity layer, non-Ethereum Virtual Machine (EVM) layer-1 deployments, and a refreshed visual identity for the Aave Network.
Aave Labs is seeking a grant totalling around $17 million, comprising 15 million GHO and 25,000 stkAAVE, to finance the initial year of the three-year plan to implement the terms of the proposal.
The proposal is currently in the “temperature check” phase. The developers are seeking feedback and ensure the proposal aligns with community sentiment before an on-chain vote.
Meanwhile, despite being the third-largest DeFi protocol with a total value locked of approximately $10 billion, according to DefiLlama, Aave’s native token, AAVE, has seen significant depreciation. As of press time, it is trading at $82.35, an 87.6% decline from its all-time high of $660 three years ago.
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