Aave set to launch third version of its crypto lending protocol on Ethereum

  • Aave v3 is set to go live on the Ethereum network.
  • The initial deployment supports seven assets including USDC and DAI.

DeFi lending platform Aave is set to launch the third version of its protocol on Ethereum after a successful DAO vote.

Aave v3 on Ethereum will be launched with support for seven assets: wrapped bitcoin, wrapped ether, wrapped staked ether, USDC, DAI, link, and aave. These assets were proposed by DeFi risk manager Chaos Labs. The Aave DAO voted in favor of Chaos Labs’ risk-off approach for the initial deployment of Aave v3 on Ethereum earlier in January.

Pricing for all assets apart from wrapped bitcoin and wrapped staked ether will come directly from a Chainlink feed. Chainlink is an oracle protocol that can provide data such as price feeds to smart contract protocols. The wrapped staked ether and wrapped bitcoin pricing feeds will rely on price adapter smart contracts, according to Aave developer BGD Labs. These price adapter smart contracts are still based on Chainlink feeds as well.

Aave v3 on Ethereum will come with only one eMode activated. Aave's eMode feature allows for maximum capital efficiency for collateral and borrowed assets with high price correlation. The initial deployment will only support eMode for ether-correlated assets. As such, the eMode for Aave v3 on Ethereum will only support wrapped ether and wrapped staked ether.

Aave v3 launching on Ethereum expands the DeFi protocol’s multi-chain approach. The third iteration of Aave’s lending app signaled the project’s intention to deploy its protocol on multiple networks. Aave v3 has already been launched on six chains: Avalanche, Optimism, Polygon, Fantom, Harmony and Arbitrum.

Aave v2 on Ethereum is the largest DeFi lender by total volume locked. The protocol controls over $3.5 billion worth of assets, according to DeFiLlama. The third version of the protocol will exist alongside its predecessor. This is because the DAO decided to go for a fresh deployment of v3 rather than deprecating v2. As such, users have the option of migrating their positions from v2 to v3. BGD Labs has been working on a tool to ease the migration process.

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