Aave Labs Receives Grant To Develop V4 Iteration Over 12 Months

The Aave DAO greenlit a grant distributing $12 million GHO to Aave Labs' over the course of one year.

Aave Labs Issued 12-Month Grant To Develop V4 Iteration

Aave governance greenlit a $12 million GHO grant for Aave Labs to build out Aave v4 over 12 months.

Avara appears on track to ship the fourth version of Aave, the largest DeFi lending protocol, in 2025.

On June 30, Aave governancepassed an Aave Improvement Proposal [AIP] allocating 12 million GHO — Aave’s native stablecoin — to Aave Labs to fund the development of Aave v4 and new “visual identity assets” for the project.

Aave Labs will receive 3 million GHO up front, with the remaining funds streamed over the course of one year.

“This AIP proposes a one-year technical contributor engagement for the Aave Labs to act as a service provider for development of Aave v4 and a new visual identity,” the proposal said.

Aave is currently the third-largest DeFi protocol with $12.7 billion in total value locked, according to DeFi Llama. Theprice of AAVE is up 4.57% over the past 24 hours, according to The Defiant’scrypto price feeds.

Updated roadmap

Avara — the parent company developing Aave, GHO, and the Lens social graph — announced plans to build theAave v4 protocol in May. Avara also outlined plans to launch a bespoke Layer 2,Aave Network, following v4’s launch.

Aave v4’s rollout is expected to comprise a staged launch over multiple years, with Avara aiming to first deploy the revamped v4 codebase around mid-2025. The project also intends to launch a cross-chain liquidity layer (CCLL) enabling Aave v4 to aggregate liquidity from across multiple chains, anticipating that the CCLL won’t go live until 2026 or 2027.

The CCLL’s launch will form part of a three-year roadmap designed to ensure Aave’s position as a top DeFi protocol. The roadmap also includes promoting the development of real-world asset products leveraging GHO, deploying Aave on networks that don’t support Ethereum Virtual Machine smart contracts, and the creation of new visual branding for the project.

Aave v4

The freshly passed grant for Aave Labs includes an itinerary outlining v4’s development over the next 12 months.

Core components include the development of a “modular architecture” aimed to improve the efficiency of integrations, Chainlink-powered automatic interest rate adjustments, interest rate premiums for assets exhibiting higher risk profiles, and an updated liquidation engine.

The roadmap also features several upgrades pertaining to GHO, including support for interest payments in the form of GHO to asset suppliers, improving the efficiency of GHO minting, and a GHO-based “soft” liquidation mechanism.

Aave’s soft liquidations draw inspiration from Curve’sLLAMA liquidation mechanism, converting users’ collateral into GHO during sharp market downturns that would otherwise threaten to initiate liquidation proceedings. When the value of an asset rises, users’ funds are converted back into the previous collateral asset, with users suffering losses in the form of slippage.

Aave Labs will also develop new visual branding for the project, including logos, color schemes, typography, illustrations, and other graphic elements.

Aave Labs will provide monthly progress reports to the Aave DAO per the grant proposal.