Aave Proposes V4 Iteration With Cross-Chain-Liquidity Layer

Aave, the largest DeFi lending protocol by TVL, has proposed plans to launch a v4 iteration within the next three years.

Announced on May 1, Aave v4 will boast a unified cross-chain liquidity layer (CCLL), aggregating liquidity from across multiple networks within a single protocol. Aave noted that CCLL would be powered by Chainlink’s Cross-Chain Interoperability Protocol (CCIP), which completed its permissionless rollout last week.

“Aave can soon scale to become a fully cross-chain liquidity protocol,” the proposal said. “This will allow borrowers to access instant liquidity across all supported networks.”

Aave v4 will also feature automated adjustments to its interest rate curve, dynamic interest rate premiums for riskier assets, smart accounts and vaults allowing users to segregate their borrowing activities, and an updated liquidation engine.

Aave said it hopes to begin prototyping its v4 protocol during Q4 and hopes to implement the code in Q2 2025. However, it does not expect the CCLL to roll out until 2026 or 2027.

The proposal also outlines plans to launch an Aave Network, which would function as the primary hub for the Aave protocol and the project’s GHO stablecoin.

Aave is also considering utilizing a rollup-like Validium architecture for the network, adopting GHO as its network token for fees, and using AAVE as the main staking asset for decentralized validators and sequencers.

Aave noted it will monitor the evolution of both Layer 1 and Layer 2 networks before finalizing the network’s architecture, but said Aave Network will inherit its security from Ethereum.

The proposal added that “Ethereum would remain the home of the Aave DAO and the Aave governance” and both Aave and GHO would continue to operate as “multichain and network-agnostic despite Aave’s plans to launch a bespoke network. Aave is also targeting 2026 or 2027 for the launch of Aave Chain.

Aave seeks to ensure future dominance

Aave is the third-largest DeFi protocol with a total value locked (TVL) of $10 billion, according to DeFiLlama.

Recent research from Token Terminal indicated that Aave has consistently enjoyed a roughly 50% share of the DeFi lending market over the past three years. Aave’s Marc Zeller replied that roughly 75% of the value in DeFi lending protocols is locked in projects leveraging versions of Aave’s codebase.

Aave said its three-year plan seeks to maintain its position as a leading DeFi for the rest of the decade. “These ideas aim to significantly boost the adoption of the Aave ecosystem and scale DeFi to reach the next billion users,” the proposal said.

Aave’s three-year roadmap also includes promoting the development of real-world asset products built around GHO, expanding Aave onto networks that do not support Ethereum Virtual Machine smart contracts, and introducing new visual branding licensed to the Aave DAO.

Aave is budgeting 15M GHO and 25,000 stkAAVE ($2.1 million) to complete the first year of the roadmap, with the DAO providing 3M GHO upfront and streaming the remaining assets over the course of the first 12 months.

The price of AAVE is down 14% over the past week amid the recent digital asset downturn, according to CoinGecko. Aave noted that more than 450,000 wallets currently hold AAVE.

[CORRECTS ON 05/1 @ 5:10PM EST TO SAY AAVE IS CONSIDERING VALIDIUM, NOT PROPOSING IT]