On August 14, the open-source DeFi protocol for lending and borrowing crypto assets, Aave, announced the start of the implementation of its new version – Aave V2. The updated protocol is said to further the development of traditional lending protocols and contribute to the decentralization of the platform by adding many innovative features.
In the announcement, the company claimed that significant gas optimisations have been introduced to the protocol, heavily reducing transaction costs of most interactions, and implementing support for the native GasToken. Moreover, debt positions of users will be tokenised to enable native credit delegation within the Aave protocol and allow for the implementation of new features like native position management from cold wallets and user-specific yield farming.
The new protocol will also make some changes in the way users operate with their digital assets. As of now, clients wanting to repay with collateral must first withdraw it, use it to buy the asset borrowed, and only after that repay the debt and unlock all the deposited collateral. Instead of making 4 separate transactions on several products, users can now deleverage their position by paying directly with the collateral in just 1 transaction.
In addition, a clear guarantee of income will be available for liquidity providers conducting deposits by introducing predictable interest rates. Along with that, borrowers will have the opportunity to use an improved version of Stable Borrow Rate, where they can lock down their borrow interest rate to a certain time period and ensure predictability of their costs of finance.
By far the biggest change is the addition of open private markets governance, which will support tokenised assets of all kinds. The company is collaborating with RealT to push DeFi and bring mortgages on Ethereum. Although not much information was released about this new feature, the tokenisation of mortgages is a big step towards the development of decentralised systems and their introduction to mass use.
Aave V2 will also introduce the ability for anyone to trade their debt position from one asset to another. Users can now trade with their deposited assets across all the currencies supported on the platform, “even when they are being used as collateral”. They can also directly take long and short leveraged positions on any of the assets supported without using third-party services.
Lastly, any holder can now safely delegate their voting rights to any other address, creating the so-called “liquid democracy”. This will happen by signing messages from the user’s cold wallet, securing their participation in the Aave governance in a process most commonly referred to as “Liquidity Mining”.