These are all new features coming to Aave V4.
The Ave protocol is gearing up for a significant upgrade with the V4 release in mid-2025.
This new version builds on the foundation established by V3, aiming to transform the decentralized finance sector (DeFi) with new features and an improved user experience.
How to improve the Aave V4 loan protocol
Aave V4 introduces a new architecture to reduce management costs and improve modularity. This change promises to facilitate capital efficiency and integrate Aave-native stablecoin, GHO, more seamlessly than ever before.
Additionally, V4 includes risk management tools and a more efficient fluid engine to strengthen security and user confidence.
“Given the competitive DeFi landscape, we believe the key to staying ahead is to continuously innovate, build and deliver great solutions that meet the ongoing requirements of the Aave community. The suggested ideas aim to put Ave at the forefront of DeFi in 2030 and beyond,” Ave Labs wrote.
The highlight of the V4 is the introduction of a composite fluid layer. This feature improves upon the Portals concept in V3, providing a more abstract and independent framework for liquidity management. It allows Ave to adjust supply and draw ceilings, interest rates and incentives without having to transition to liquidity for new credit modules.
Another significant development is the implementation of loosely controlled interest rates. This approach automates interest rate adjustments based on real-time market conditions. The integration with Chainlink ensures the most accurate and efficient on-chain interest rate models.
Read More: Aave (AAVE) Price Prediction 2024/2025/2030
Aave V4 also plans to introduce Liquidity Premiums. This feature enables different borrowing costs based on the risk profile of the collateral, fine-tuning the economic incentives to use risky assets.
For user convenience, V4 launches Smart Accounts. These accounts take the complexity out of managing multiple wallets by allowing users to hold multiple credit positions from a single wallet interface.
Regarding risk management, V4 adopts a flexible risk configuration system. This system allows for asset-specific structures that can be modified without impacting existing borrowers, significantly reducing administrative friction.
Read more: How to use Aave?
The Aave V4 development period will start from initial research in Q2 2024 to full release in mid-2025. This rating approach involves extensive community engagement, rigorous testing, and multiple audits to meet safety and reliability standards.
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