The popular DeFi protocol Aave is drafting new expansion plans as its TVL reaches 18 billion dollars. The team hopes to exploit the demand and make DeFi mainstream through the new and improved V3 protocol launch. Reportedly, the V3 protocol would address some of the fundamental issues of the network to enable secure cross-chain connectivity.
Aave is not just the earliest but easily among the most popular DeFi platforms in the crypto space. The project was developed by a Swiss company of the same name in 2017. In just around five years, the project currently has 18 billion dollars in total value locked (TVL). Surprisingly, the numbers are nearly a hundred times larger than what the creators of Aave originally anticipated.
The platform expects to further this successful momentum by expanding its operations to different blockchain networks. However, the platform might run into problems as it was designed only to hold millions, and the current value is already in the billions. So, the team has developed the V3 protocol, which would address some of the fundamental issues found in the current V2 protocol.
First of all, Aave is an open network that allows users to contribute to the code to better the platform freely. Although it helped with the project’s growth, it also significantly increased the security concerns. So, to address these issues, the V3 protocol offers supply caps to limit the asset supply, borrowing caps to limit how much of an asset can be borrowed, and isolation of assets that allows you to borrow only the assets you supplied as collateral.
In addition to risk mitigation measures, the V3 protocol also allows Aave to operate from seven different blockchains, including Fantom, Arbitrum, Optimism, and Harmony. The V2 protocol currently runs only on Ethereum, Avalanche, and Polygon. The activities from the Ethereum network can be moved to layer-1 or layer-2 solutions to address the speed and performance concerns of users and developers.
Furthermore, users from all these chains will be allowed to vote on the governance decisions of Aave. Aave CEO Stanu Kulechov said that this new protocol would become the underlying framework for financial operations in the future, just as IP and HTTP have become the back-end of the internet.
Only recently, Aave launched its service called the Aave Arc. The initiative was brought in to help financial institutions interact and trade with approved parties, and it was a motivating factor for large investments to enter DeFi. Despite being new, the effort has received 30 million dollars from participants like SEBA Bank and Fireblocks, a digital assets custody, transfer, and settlement platform.
According to Kulechov, Aave might also explore other areas like collateralizing NFTs. The self-sustaining governance system of Aave currently brings nearly 50 million dollars a year in revenue.