Aave Labs presents major improvements and expansions in the Aave V4 proposal

Aave Labs, the team behind DeFi lending platform Aave, has released several major updates and expansions two years after introducing V3.

Suggested improvements include Aave V4, Aave Network, Cross-Chain Liquidity Layer, non-EVM L1 deployments and a new visual identity.

Avenue V4

According to a recent blog post, Aave V4 will be built on a new architecture featuring an efficient and modular design that aims to minimize disruptions to third-party integrations.

The most important architectural change of the latest iteration is the proposed integrated fluid layer, which expands on the portal concept introduced in Aave V3. This layer enables a completely agnostic, neutral and abstract infrastructure for liquidity provisioning.

It is also offered to manage supply/draw fees, interest rates, assets and incentives while allowing other modules to draw liquidity from it. This allows Aave DAO to add or remove credit modules without having to switch to liquidity.

The main function of this architectural approach is to facilitate the addition or improvement of credit features without modifying the overall system or the liquidity module and at the same time solving the issue of fragmented liquidity in older versions of the protocol.

Aave's proposal has demonstrated that the fluid layer can improve the integration of GHO and other protocol-native assets by supporting native and native assets. Aave V4 offers fully automatic interest rates with adjustable slopes and kink points.

Other planned features

‘Smart Accounts' is another feature introduced in the V4 iteration to streamline the user experience to solve a major problem with Aave V3 – eliminating the need for separate wallets when borrowing using eMode or managing featured properties. Users can create multiple smart accounts in a single wallet, simplifying interactions with the protocol.

The proposal also features a per-asset dynamic configuration mechanism, where users are “stuck” with the current asset configuration when borrowing. If a new resource configuration is required, a new instance is created while existing users are stuck with the old configuration.

Meanwhile, the company mentioned that they are collaborating with Chainlink to explore solutions to fully automate risk management. The concept involves using ad-hoc, feed-in-the-chain methods to assess asset risk and use dynamic risk metrics through control theory or artificial intelligence.