12 Nov 2020 Anthony Lehrman
Aave Launches V2 Of Its Defi Protocol On A Public Testnet
One of the most popular DeFi lending protocols, Aave, now undergoes its long-awaited v2 upgrade. The first step for the new protocol was to be launched on the Kovan public testnet. Despite of the news, the token`s price went down yesterday, but on a weekly scale, Aave has doubled in price.
Originally, the migration to v2 was first announced amid the DeFi boom in mid-August. The plan included a list of improvements and new financial incentives. With the Aave’s announcement from November 11, puts the improvements to life.
One of the key protocol improvements is the chance of repaying a portion of the collateral without conducting multiple transactions. Doing so, the protocol would result in time optimization, lower network fees, and decreased effort. Another major improvement is the ability to tokenize debt positions, which will allow native credit delegation within Aave’s v2 protocol. The result of the improvement would also allow better and more efficient positions management for both borrowers and lenders. The fixed interest rates, combined with stable borrowing rates eliminate losses due to volatility.
Also, Aave’s protocol update would tackle the problem with gas fees. Aave would utilize EIP 2612, which would allow gassless approvals. Further gas fee optimizations would also remove some of the burdens of network fees.
“V2 will be the start of what is commonly referred to as ‘Liquidity Mining’ for the users of the Aave Protocol,” Aave noted in its announcement. Aave further clarified that the protocol code is already under four audits and formal verification. After the verification is complete, the results from the audits would be published before the updated protocol’s mainnet launch.
However, the much-anticipated protocol update news didn’t reflect positively on Aave’s native token price. AAVE suffered from a 14% loss from November 11 – from $67 to $57. Nevertheless, the protocol’s token is in a recovery mode after last week’s DeFi slump, increasing 160% from $26 to a weekly high of $67. The current trading price of AAVE is $55.5.
Despite the token price increase, Aave’s total value locked (TVL) is in a steady decline since the August 31 all-time high of $1.7 billion. The TVL dropped below one billion dollars in early November but bounced back to $1.16 as of press time. The value puts Aave as the fifth-largest DeFi protocol by measured TVL.
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