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The Launch of Aave V3 Aims To Solve All The Issues in DeFi

Aave V3 Might Improve DeFi

Just recently, Aave V3 made its debut. Its goal is to solve all the possible problems in the DeFi space. Aave has been a pioneer in the DeFi ecosystem for more than a year now. However, working on a multi-chain ecosystem has its drawbacks. Additionally, the protocol was not immune to the congestion and high latency of Ethereum.

These obstacles seem to end with the launch of the newest version of Aave. Aave’s current version is the perfect solution for many issues. So far, the team has addressed the protocol’s technical restrictions and user issues.

Following more, V3 of Aave focuses on four areas of improvement. These include capital efficiency, protocol safety, decentralization, and user experience. Aave’s development team spent months rewriting the protocol to address these areas.

A Solution for Security and More Yields

The main objective of V3 is to increase the protocol’s yield for sources of liquidity. In the general analysis, Aave’s overall liquidity is close to $20 billion. Henceforth, this is considered a pretty big undertaking. 

Liquidity in Aave’s smart contracts now generates yield for liquidity providers. They do this by borrowing activity on the protocol. As the yield is steady and reliable, this is figuratively a financial jackpot. That is why there is space for improvement in this area. 

Regarding the issue of increasing yield, Aave V3 implements a new feature. It is a new user-facing function that reuses unused capital. They do this through a new method to reduce the risk of smart contracts being prone to cyberattacks. Moreover, it doesn’t need to raise the solvency contingencies and relocate the assets to other protocols.

Furthermore, the new functionality is known as Isolation Mode. It is based on the MakerDAO method of exposure control and allows members of Aave Governance to vote on assets when it comes to listing them as isolated. With an isolated asset as collateral, the borrower can’t add additional assets to their collateral. They are limited to borrowing stablecoins and have a debt limit.

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