Aave Labs Maps Out Protocol V4: Prioritizing GHO Stability

• Aave is expanding and has teased an incoming V4 upgrade.
• This upgrade is slated for a 2025 rollout and will prioritize stability and liquidity.

As revealed in a recent announcement, Aave Labs, an open-source liquidity platform is on track to upgrade its protocol from V3 to V4. The proposed protocol upgrade aims to improve Aave-native stablecoin and prioritize architecture for cross-chain liquidity.

V4 Positions Aave Labs for Success

According to the announcement from Aave Labs, the V4 upgrade is part of its 2030 vision, positioning the protocol for continued success. The protocol said initial development would begin in the second quarter of 2024 until a full release by mid-2025.

During this upgrade, Aave Labs will serve only as a technical contributor. At the same time, the Aave DAO governance will spearhead all deployments of the code bases produced by Aave Labs or other contributors.

The upgrade focuses on improving previous iterations by proposing new, efficient architecture and modular design that has the goal of reducing governance cost, enhancing capital efficiency, reducing risk, and creating an immutable and permissionless financial layer over the long run.

The successful elements of V3, such as eMode, isolation mode, and granular risk management, are built upon in the research for V4. The upgrade also focuses on introducing a Unified Liquidity Layer. Other modules can easily draw liquidity from this layer as it proposes to handle supply/borrow limits, interest rates, assets, and incentives.

Unlike earlier versions, the proposed new abstraction for the liquidity layer will enable the Aave DAO to onboard new borrow modules and offload old ones in the future without requiring a migration of liquidity.

With this design, borrowing features such as isolation pools, RWA modules, and CDPs can improve on the need to change the entire system or the liquidation module. Moreover, the problem of fragmented liquidity experienced by older versions of the protocol will be avoided.

The liquidity layer can support both supplied and natively minted assets, resulting in improved interaction with GHO and other collateralized, Aave native assets. Another notable feature of the liquidity layer is the proposed introduction of the Liquidity Premiums. Liquidity Premiums are proposed to implement adjusted borrowing charges for borrowers based on the composition of their collateral.

Meanwhile, Summer.fi, a leading decentralized finance platform recently announced the launch of a migration tool that provides a seamless transition for Aave V3 protocol users, as previously reported by Crypto News Flash.

AAVE on a Bullish Momentum

AAVE, the native asset of the Aave ecosystem is currently experiencing a bullish movement, increasing by over 4% in the past day to trade at $84.29. The market cap has also increased by the same percentage, while trading volume increased by a nominal 0.02% to $85 million.

Recalling Crypto News Flash’s previous disclosures, some experts believe AAVE could see its price exceeding $160 by the end of the year.