The development team behind the decentralized lending protocol AAVE, Aave Labs, has released a proposal called “Aave 2030” on the AAVE governance forum. The proposal outlines a 3-year development plan based on the AAVE V4 version.
In the proposal, Aave Labs states that the introduction of AAVE V4 is the foundation of the entire plan. It includes a series of improvements to the V3 version and highlights several features of AAVE V4:
1. Unified Liquidity Layer: AAVE V4 introduces a unified liquidity layer that manages supply/borrowing limits, interest rates, assets, and incentives. It allows other modules to provide liquidity without the need for migration from existing liquidity. This abstracts and integrates the new liquidity layer compared to the V3 version, avoiding the liquidity fragmentation issues of the old version.
2. Fuzzy-controlled Interest Rates: AAVE V4 proposes the use of fully automated interest rates with adjustable slopes and inflection points. The current settings controlled by governance mechanisms increase governance burdens and decrease capital efficiency. The fuzzy interest rate design dynamically adjusts the inflection points based on market conditions. The base rate will rise or fall according to market demand, optimizing rates for suppliers and borrowers.
3. Liquidity Premium Mechanism: AAVE V4’s liquidity premium mechanism adjusts the borrowing costs in the market based on the risk level of collateral, ensuring fairness in pricing. Higher-risk collateral leads to relatively higher borrowing costs, while lower-risk collateral helps lower borrowing costs.
4. Aave V4 Borrowing Module: Aave introduces the concept of smart accounts in the V4 version to address user experience issues in the V3 version. Smart accounts allow users to create multiple accounts with a single wallet, simplifying interactions with the protocol. Smart accounts also introduce Aave Vaults, enabling borrowing without additional collateral provided to the liquidity layer. The collateral is stored in the smart account until the borrowing is completed or liquidation occurs.
5. Dynamic Risk Allocation: Aave V4 proposes a dynamic allocation mechanism that links a user’s borrowing to the current asset allocation. If market conditions change and require updated allocations, new asset allocation instances will be created without affecting existing user allocations.
6. Automated Asset Offboarding: In the current version, asset offboarding requires multiple governance decisions, including gradually reducing the loan-to-value ratios and liquidation thresholds. In V4, when automated offboarding is triggered by governance, a new allocation is introduced, immediately reducing the liquidation threshold to zero for new users. Each activity on the asset triggers a series of reductions in liquidation thresholds, starting from the highest threshold until all user thresholds reach zero, officially completing the offboarding.
7. Automated Treasury Management: In the current V3 version, reserve factors for each asset need to be periodically reallocated to stablecoins or ETH through governance. V4 introduces a reverse auction mechanism where, once a certain threshold is reached, each token collected through reserve factors can be automatically sold to any pre-configured asset.
8. Actions: Aave V4 allows users to customize automatic actions in response to governance decisions.
The proposal also outlines Aave Labs’ plans for Aave 2030, including cross-chain liquidity layer integration, the introduction of real-world assets (RWA) and the native stablecoin GHO, and the development of the Aave Network. Aave Labs aims to expand Aave’s liquidity protocol to become a cross-chain liquidity protocol and focus on building RWA products around GHO. Collaboration with Chainlink is also mentioned.
To effectively manage and implement the Aave 2030 plan, Aave Labs sets specific goals and timelines:
– Year 1: Introduce Aave visual identity, Aave V4 template, and complete Aave V code. Integrate at least one innovative GHO promoter and support a non-EVM chain.
– Year 2: Develop Aave Network, cross-chain liquidity layer, research and introduce RWA products, and integrate with at least one non-EVM chain. Launch at least one Aave Labs product to drive Aave/GHO growth.
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