The third version of the Aave cryptocurrency lending app has been deployed on Ethereum for the first time, according to a Jan. 27 tweet from the Aave team. “Aave V3” was originally released in March 2022, and was deployed on multiple Ethereum Virtual Machine (EVM) compliant blockchains soon after. Until now, Ethereum users only had access to the older version of the app.
Aave Protocol V3 is now live on the Ethereum market
”The most exciting aspect of V3 is its flexible design, which enables a variety of new risk mitigation features, and its improved capital efficiency & decentralized liquidity – all while reducing gas costs.” @StaniKulechov pic.twitter.com/QsSnnlhEMr
— Aave (@AaveAave) January 27, 2023
Aave V3 includes several features aimed at helping users save on fees and maximize the efficiency of users’ capital. For example, the High Efficiency mode allows the borrower to avoid some of the more stringent risk parameters of the application if the borrower’s collateral is highly correlated with the asset being borrowed. The developers say this can be useful for stablecoin borrowers or liquid staking derivatives.
In addition, the “isolation” feature allows certain riskier assets to be used as collateral, as long as they have their own borrowing limit and are only used to borrow stablecoins. In the previous version, there was no way to limit what type of asset could be borrowed with a certain type of collateral. This meant that lower market capitalization and illiquid coins often could not be used as collateral.
V3 also includes a gas optimization algorithm which, according to the developers, will reduce gas fees by 20-25%.
V3 code was released in November 2021. In March 2022, the Aave DAO approved an initial vote to deploy the new version. In the months that followed, V3 was deployed to Avalanche (AVAX), Arbitrum (ARB), Optimism (OP), and Polygon (MATIC). However, the Ethereum version of Aave has always been the most liquid and V3 was not available on it previously.
According to the official proposal, the initial release only has seven coins. Voting for the release began on January 23 and lasted for two days. After supporters won the vote, implementation of the proposal was able to move forward on January 27. Less than 0.01% of DAO members voted against the proposal.
In November 2022, Aave changed its governance procedures after it was hit by a $60 million short selling attack that ultimately failed.
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