Aave Labs, the pioneering force behind the decentralized finance (DeFi) lending protocol Aave, has unveiled an ambitious proposal to overhaul its protocol, marking a significant step towards its envisioned five-year roadmap.
On May 1, the DeFi lending platform introduced a governance proposal aimed at soliciting community feedback on upgrading the protocol to its next-generation version 4.
The proposal, as outlined by the Aave team, encompasses substantial upgrades and expansions to the Aave Network, including the introduction of a cross-chain liquidity layer, non-Ethereum Virtual Machine (EVM) layer-1 deployments, and a revamped visual identity.
Aave V4 is slated to be constructed on an entirely new architecture, featuring a “Unified Liquidity Layer” designed to facilitate seamless integration of features such as isolation pools, risk modules, and the platform’s native stablecoin, GHO.
Among the proposed enhancements are interest rates capable of dynamically adjusting based on market conditions, leveraging Chainlink data oracles. Additionally, Liquidity Premiums are suggested to fine-tune borrowing costs according to collateral risk profiles, alongside the introduction of vaults and smart accounts for streamlined user management of positions.
The proposal also addresses Aave’s algorithmic stablecoin GHO, launched in July 2023, proposing improvements to the liquidation engine, enhanced integration options, and the implementation of an emergency redemption mechanism for GHO depegging scenarios.
Currently in the “temperature check” phase, the proposal gauges community sentiment before advancing towards an on-chain vote. A development timeline spanning from research completion in Q2 2024 to a full V4 release by mid-2025 has been outlined.
Aave Labs is seeking a grant with a budget comprising 15 million GHO and 25,000 stkAAVE, totaling approximately $17 million, to kickstart the execution of the first year of the three-year plan.
Aave ranks as the third-largest DeFi protocol, boasting a total value locked of around $10 billion, according to DefiLlama. At the time of reporting, its native Aave token traded at $82.35, reflecting a 9% decline over the past week and a substantial 87.6% decrease from its all-time high of $660 recorded three years ago.