Aave set to launch third version of its DeFi protocol across six networks

DeFi lending platform Aave has announced the launch of the third version of its protocol, promising more security, decentralization, and capital efficiency for users.

Aave’s third version, stylized as Aave V3, will be available across six networks: Polygon, Fantom, Avalanche, Arbitrum, Optimism, and Harmony. Aave V3 will also soon be deployed on the Ethereum mainnet, the company told The Block.

Many crypto projects will add support for V3, including aggregators like ParaSwap and 1inch, as well as portfolio trackers and wallet providers Instadapp, Debank, DeFi Saver, Zapper and Zerion.

According to the announcement, Aave V3 comes with a few enhancements including cross-chain asset flow compatibility and gas optimization. This will make it easier for Aave users to move their assets between different blockchains and will make transactions cheaper where possible.

As for security, the new version will come with an "isolation mode," which aims to reduce risk for newly listed tokens. This will let users limit their exposure to such potentially high-risk tokens by only being able to borrow specific amounts.

In the DeFi space, newly listed tokens can carry reentrancy risks in their smart contract codes that can open the door for malicious flash loan attacks. The recent attack on Agave (an Aave fork) and Hundred Finance on the Gnosis chain is an example of such a situation. According to the announcement, capping the borrowing threshold for newly listed assets will allow Aave to increase the variety of tokens that can be listed, without posing a material risk to the platform.