02 May

The company behind the decentralized finance (DeFi) lending protocol, Aave Labs, has released a five-year plan that includes a proposal for the system's progression and improvement.

In order to gather community input on updating the protocol to its next-generation version 4, the DeFi lending platform unveiled a governance proposal on May 1.

The team added that the proposal calls for "major upgrades and expansions" to the Aave Network, a cross-chain liquidity layer, non-EVM layer-1 deployments, and a "fresh new visual identity."

To enable better integration of features like isolation pools, risk modules, and its native stablecoin GHO, Aave V4 would be constructed on a "completely new architecture" and incorporate a "Unified Liquidity Layer."

Interest rates that can automatically change on the fly based on market conditions and by utilizing Chainlink data oracles are further features that are being considered.

Liquidity Premiums to modify borrowing prices according to collateral risk profiles and vaults and smart accounts to streamline user administration of positions were also proposed.

A portion of the plan was devoted to Aave's algorithmic stablecoin, GHO, which debuted in July 2023 but is still insignificant in comparison to rivals like Tether USDT, which has a $49 million market value.

Suggestions pertaining to GHO include enhancements to the liquidation engine, including variable liquidation bonuses and "soft" liquidations, as well as improved GHO integration, like interest-earning possibilities.

As part of the major upgrade, an emergency redemption method for GHO depegging circumstances was also suggested.

Before going to an on-chain vote, the proposal is presently in the "temperature check" phase, which gauges community sentiment.

It describes a development schedule that runs from the end of research in Q2, 2024, to the mid-2025 release of V4 in its entirety.

For the first year of the three-year plan, Aave Labs is asking a grant with a budget of 15 million GHO and 25,000 stkAAVE, or roughly $17 million in total.

DefiLlama states that Aave is the third largest DeFi protocol, with a total value locked of almost $10 billion.

May 2024, Cryptoniteuae

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