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Launch of Aave V3 Prompts 50% Rally


Ethereum-based lending protocol AAVE is one of the most proven crypto assets.

Covered:

  • AAVE Back in the Limelight
  • V3 Features and AAVE Token

AAVE Back in the Limelight

Despite high gas fees, Aave Protocol, the top money market and liquidity protocol on Ethereum, has become a mainstay in the crypto space. More than a mainstay, it is currently the #1 DeFi protocol by TVL rankings with over ~$23 billion at press time. Launching on Avalanche and Polygon in late 2021 allowed Aave to compete with faster chains, allowing the OG protocol to shake off its competitors.

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Credit: DefiLlama

Aave V3, which went live last week, is likely part of the recent surge to the #1 spot. If you’re not familiar, Aave is mainly used for borrowing and lending. “Using their deposits as collateral, users can then borrow other assets to use in other DeFi protocols.” This allows users to leverage their crypto in an overcollateralized way, but you can still get liquidated if the your deposited assets start to tank in value.

Recommended: What is Aave?

“One of Aave’s flagship products are “flash loans,” which have been billed as the first uncollateralized loan option in the DeFi space. There’s a catch: they must be paid back within the same transaction.”

Users can also earn yield for depositing their assets and providing liquidity. Launched in 2019, Aave is one of the most tried and true DeFi plays in the game. Aave V2 was released in 2020, which included “the ability to swap collateral within the protocol as well as more flexible borrowing rates.” The recent release of V3 is aimed at supercharging Aave in the multi-chain universe with “various features catered to multi-chain lending and other long-tail assets, both within and beyond Ethereum.”

V3 Features and AAVE Token

Among the new features in V3 are “greater capital efficiency, increased security and cross-chain functionality while also helping to promote decentralization across the DeFi ecosystem.” Portals, one of the new features, will offer cross-chain bridging with approved bridge protocols, which will need to be “permit listed” via Aave governance.

This rollout prompted a 50% rise for the Aave token in March, and an overall rally of 110% “from a low of $114 on March 15 to a daily high at $242 on March 29.” The blue chip protocol has been increasing its fundamental value, ecosystem, and the long awaited release of V3 was a major driver of the March pump.

At press time, the token is trading at $245 and has climbed back into the top 50. Users get benefits and incentives when using the AAVE token on the protocol. For instance, Aave borrowers don’t get charged a fee if they take out loans denominated in the Aave. It is also designed to be deflationary.

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Credit: Coin Market Cap

It is a great sign for Ethereum that its oldest, blue chips still are retaining users, generating buzz, and releasing steady updates to the protocol. For a nascent, wild-west “industry” where projects come and go, Aave stands out as a clear winner. Most protocols are definitely going to stand on their giant shoulders going forward. It will be interesting to see how long they will hold their status as the #1 money market protocol in the game.

You can find more about the nitty gritty of Aave V3 in an interview with the founder, Stani Kulechov, here. If you wish to use Aave, here is a guide on how to get started.

Recommended: DeFi Demystified — What is a Liquidity Provider?





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