Shane Neagle · 9 hours ago · 5 min read
Leading decentralized finance protocol Aave has just rolled out its biggest update yet: v2, or version 2.0.
This update has been hyped for a long time, as many expect it to begin turbocharging the growth of the protocol. Through Aave, Ethereum DeFi users can easily lend and borrow top digital assets like ETH and stablecoins. The protocol currently has a total locked value of $1.5 billion as per DeFiPulse, making it the fourth-largest DeFi protocol by that metric.
What is Aave v2?
Rolled out just minutes ago as of this article’s writing, Aave v2 aims to issue solutions to some pain points that users of the first iteration of the protocol had.
According to founder Stanti Kulechov, Aave v2 allows its users to swap their underlying collateral in a gas-efficient manner. When using Aave, a key pain point during the summer and during times of immense volatility was the extremely high transaction fees, effectively pricing out smaller users.
Per an Aave document obtained by CoinDesk, collateral swapping can help users avoid liquidations:
“Collateral swapping can be a useful tool to avoid liquidations. If the price of your collateral starts to fall, for example, you can simply trade it for a stablecoin so you don’t have to worry about price fluctuations and potential liquidation.”
Another key use case of this upgrade is the ability to delegate credit lines to addresses other than your own or sub-addresses you may own.
This means that you can deposit $1,000 worth of collateral into Aave, then delegate that credit to another address to let the owner of that address use it as collateral.
@AaveAave launched v2. 🔥
– Swap your yield
– Swap your collateral
– Close your loan with your collateral
– Delegate credit
And much much more, Aavengers enjoy ❤️👻 https://t.co/OOb8EjD2j9
— stani.eth 👻 v2 mode 👻 (@StaniKulechov) December 3, 2020
The idea here is to create a more complex financial system for the DeFi space.
One key issue that Aave has yet to overcome is the vast amount of overcollateralized loans in the space. But due to the permissionless and uncensorable nature of crypto assets, Ethereum included, it is unclear if this issue will be solved any time soon.
AAVE is surging on the news. Since news of Aave v2 dropped, the coin has surged by eight percent from $84 to $91. Analysts expect the coin to move even higher in the weeks ahead as Bitcoin continues to press higher and as DeFi continues to gain traction.
Yearn.finance also working on a v2
Another top DeFi protocol currently working on a v2 is Yearn.finance (YFI), the yield aggregator and multi-faceted DeFi ecosystem.
Yearn’s developers are purportedly working on a version two for its Vaults system, which allows users to deposit cryptocurrencies and easily earn a regular return. This new version will use multiple yield farming strategies with one deposit to maximize yields and to reduce the attack surface.
This upgrade is also expected to send Yearn.finance and the YFI coin itself to a new level of adoption and overall notoriety.