Popular decentralized money market, AAVE announced the launch of its second version on Ethereum mainnet. AAVE v2 is introduced with new features such as repaying with collateral and gas optimizations. AAVE brought its first version earlier this year and successfully grew to over $1b in total market size. It included features like flash loans and tokens for DeFi users. The new features will allow AAVE users to trade their crypto for all other assets available on the platform. The users can directly access the second version of AAVE through different wallets and platforms such as Argent, Zapper, Zerion, imToken and DeFi Saver.
What is AAVE v2?
AAVE v2 is the latest upgrade to its first version with new features for the users. AAVE’s upcoming attributes included credit delegation apart from flash loans and stable rates to save the interests of borrowers. AAVE is also working at improving and simplifying its architecture model. It has joined hands with Certora and Consensys Diligence along with other auditors to establish a strong foundation of security for its users.
AAVE v2 features
The new key features introduced in version 2 are targeted to improve many of its existing features making it cheaper and user-friendly.
Flash loans and Collateral swap
Flash Loans enable users to borrow instantly and, at the same time, ensure the reserve pool’s safety. Its use cases include arbitrage, collateral swapping, self-liquidation, and others. The collateral swap will allow users to trade their collateral assets for any other asset including stablecoin supported by AAVE protocol. Users can use those assets to earn yields on the market. Collateral swapping helps to pass over liquidations. Such features are beneficial for swapping assets in return for the best yields on the market, making AAVE provide a first of its kind market for collateral and yield trading in DeFi.
The new features are designed to give more decision making power to the users. Anyone can now be able to buy or sell directly with their collateral and close their loan positions in a single transaction. Aave V2 introduces gas optimizations, lowering the cost of protocol transactions up to 50%. This has been included in the features to overcome network congestion on Ethereum and high gas prices for transactions. Additionally, batched flash loans will let users buy multiple assets in a single transaction. In its first version, this used to be a tiring multistep process with gas fees charged at every step making it an expensive experience.
AAVE also hinted to introduce a migration tool in the coming months to help users to make an easy shift from AAVE v1 to v2 protocol. This feature will be introduced by the use of flash loans.
Debt tokenization will allow users to borrow with variable and multiple stable rates. In the earlier version, users only had the convenience to select either one of the two options. Such features offer a better user experience, along with new and improved trading facilities. In November, AAVE has launched its V2 testnet on the Kovan network
Provide a stable rate
AAVE is a decentralized money market protocol enabling its users to borrow and lend their crypto assets while offering a stable and variable interest rate. In simple words, AAVE lets users earn interest on deposits & borrow assets.
Native credit delegation
Credit delegation was first introduced by AAVE in July 2020. Credit delegation (CD) enables liquidity sourcing into traditional finance. Borrowers can access uncollateralized loans. Delegators here would be crypto funds while the borrowers can be any institution, business, NGO or [crypto]exchanges. The goal is to expand the market for liquidity sources for money lenders. CD allows delegators to earn more yield other than what they already earn from the protocol.
AAVE announced its new governance model on Ethereum mainnet in September 2020. Before that, Kovan and Ropsten testnets were used by the users to vote on AAVE improvement Proposals (AIPs). Previously run on the Kovan and Ropsten testnets, where users could trial vote on Aave Improvement Proposals (AIPs) that would be used to further develop the token.
With the launch on mainnet, Aave users can now vote on the first official AIP, which focuses on a planned token migration. AIP1 determines the process of migration from the LEND token to the AAVE token. LEND was AAVE’s governance token before the release of AAVE token. Users can connect their wallets in the AAVE DApp, select the proposal and vote. The voting period remains functional for five days. Users of AAVE v2 can sign the messages from their cold wallet to participate in the AAVE governance.
Aavegotchi is a project initially funded by AAVE. Users can buy and sell wearables and consumables. Whereas fees from mini-games are received by the platform as a source of funding. DAO-governed sale of $GHST utility token (DAICO) will be redeemable for Aavegotchi collectibles when they go live on mainnet and burned upon use. DAO will be used to govern further development and reward token-holders for good decision-making. GHST, its native token is currently trading at market cap $7,797,643 USD.
AAVE is an Ethereum based market money protocol quite similar to traditional finance, borrowers and lenders create the market. AAVE is popular for introducing the concept of flash loans, meaning that borrowers are not required to produce collateral to borrow. It works on a stable rate model that protects borrowers from the interest rate volatility. This is done by its features like swapping, tokenization and gas optimization. AAVE token is currently trading at $89.49 USD at market capital $1,067,564,728.
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