Revolutionizing Crypto: Aave Labs Announces Major Upgrades with Aave V4 Proposal (AAVE)

• Aave Labs, the team behind the DeFi lending platform Aave, has proposed a series of major upgrades and expansions two years after introducing its V3.
• The suggested improvements include Aave V4, Aave Network, a Cross-Chain Liquidity Layer, non-EVM L1 deployments, and a fresh visual identity.
• The most significant architectural change of the latest iteration is the proposed introduction of a Unified Liquidity Layer, which expands on the Portals concept introduced in Aave V3.

Aave Labs proposes major upgrades to its DeFi lending platform, including a new architecture for Aave V4 and a Unified Liquidity Layer. The changes aim to improve liquidity provisioning and streamline user experience.

Aave V4: A New Architecture

Aave V4 is set to be built with a brand-new architecture featuring an efficient and modular design. The biggest architectural change is the proposed introduction of a Unified Liquidity Layer, which expands on the Portals concept introduced in Aave V3. This layer aims to provide a fully agnostic, independent, and abstracted infrastructure for liquidity provisioning. It is also proposed to manage supply/draw caps, interest rates, assets, and incentives while enabling other modules to draw liquidity from it. This would allow the Aave DAO to add or remove borrow modules without the need to migrate liquidity.

Addressing Fragmented Liquidity

The main function of this architecture approach is to facilitate the addition or improvement of borrowing features without overhauling the entire system or the liquidation module. At the same time, it addresses the issue of fragmented liquidity present in older versions of the protocol. The liquidity layer is capable of natively supporting both supplied and natively minted assets, thereby improving integration with GHO and other collateralized protocol-native assets. Aave V4 also proposes fully automated interest rates with adjustable slopes and kink points.

Streamlining User Experience with Smart Accounts

‘Smart Accounts’ is another feature proposed for introduction in the V4 iteration. This feature aims to streamline the user experience by eliminating the need for separate wallets to manage positions when borrowing using eMode or isolated assets. Users will be able to create multiple smart accounts within a single wallet, simplifying interactions with the protocol. The proposal also features a dynamic configuration mechanism per asset, where users are “hooked” to the current configuration of an asset when they borrow. If a new asset configuration is needed, a new instance is created while existing users remain hooked to the previous configuration.

Automating Risk Management

Aave Labs is also collaborating with Chainlink to investigate solutions for fully automating risk management. The concept involves utilizing ad-hoc, on-chain feeds to evaluate asset risk and dynamically adjust risk parameters through control theory or artificial intelligence.

Conclusion

The proposed upgrades to Aave’s DeFi lending platform aim to improve liquidity provisioning, streamline user experience, and automate risk management. These changes reflect Aave Labs’ commitment to continuous innovation and user-centric design. As the DeFi landscape continues to evolve, these upgrades could position Aave as a leader in the space.