Defi Platform Aave Launches v3 With Cross-Chain Swap Support

Defi platform Aave has released version three, which focuses on its users’ risk management and capital efficiency. The platform has launched its Version 3 across six chains, with the ETH mainnet coming in an undisclosed date.

Introducing the Crypto Space to Cross-Chain Lending

Per Aave founder Stani Kulechov, the V3 will come with new functionalities and designs to improve user experience and capital efficiency. These mechanisms include cross-chain lending, isolated markets, and collateral efficiency.

Aave, a Defi leader, has released its V3 across six different chains. It will also launch on the Ether mainnet at an undisclosed time. These upgrades may boost the platform’s performance and help maintain its leadership position in Defi. Currently, Aave has over $11B in TVL only behind Terra blockchain-based Achor protocol which has $13B in TVL.

Currently, Aave is live on blockchains like Ethereum, Avalanche, and Polygon, with some assets featuring variable borrow and interest rates per chain. Along with variable interest rates, the liquidity can also change uncontrollably between the chains.

Portals is a feature in Aave that allows for the minting and burning of assets through cross-chain bridges. The bridge will allow for the minting of Aave’s ‘a Tokens’ in one chain and burn them on the other chain to maintain the accounts between different chains while allowing users to benefit from the market.

“You could deposit in [Ethereum] mainnet, but borrow from Polygon and repay on Avalanche – all under the hood,” said Kulechov.

Introducing the New Isolated Markets

In addition to the impressive capital mobility, the new version of Aave also increases the ease of users onboarding new forms of collateral. 

“V3 is mostly about risk awareness/mitigation and capital efficiency,” said Kulechov. “In terms of risk mitigation, we can reduce the risk of new collaterals coming into the ecosystem and still get them listed but with limited exposure.”

Aave is improving its systems as it faces stiff competition from other Defi projects like Rari and Euler that feature exotic assets with permissionless lending pools. To counter the competition, Aave is introducing “isolated markets.” 

The feature will serve as a pipeline to allow Aave to list assets as collateral options faster than the current process. However, this feature will function as a single collateral source and not as a bundle. Additionally, the isolated markets will feature supply caps that will be managed and controlled by the platform’s governance.

“Over time, as that asset matures, you can increase the ceilings and eventually turn the isolation model for particular assets off. So it kind of allows asset scalability,” added Kulechov.

The High-Efficiency Mode – Collateral Efficiency

This feature is the one that Kulechov described as the most exciting one. It will allow users to leverage high loan-to-value ratios as long as they take loans in the same asset offered as collateral. In some instances, users will enjoy up to 98% LTV.

The feature will be available for ETH assets, staked Ether derivatives, stablecoins, and wrapped BTC like wBTC.

“The main idea here is that once we have different kinds of stablecoins – euro stablecoins, pound stablecoins – you can essentially have FX trading on-chain,” Kulechov explained.

However, V3 will spare Aave’s institution targeted Aave Arc market. Regarding that occurrence, Kulechov explained that the Aave Arc market has a design that is rather boring as its users do not want to see any changes.