Aave Rolls Up its Sleeves With Only 5% of Goals Met

A v3 deployment on Ethereum, a stablecoin, and a debit card. Aave, the trailblazing DeFi lending protocol, has a lot of work to do.

The No. 4 DeFi protocol with $5.4B in total value locked has only completed one-twentieth of the work in its long-term strategic plan, according to Marc Zeller, the lead of Aave’s integrations team.

In an interview on Oct. 30 with the newsletter Alpha Please, Zeller said that Aave has completed just “5%” of its goals. “There’s a lot of stuff that people already know but somewhat forgot,” he said.

New Stablecoin

Aave’s to-do list is lengthy. Zeller said its next task is deploying its v3 iteration on Ethereum. According to Aave’s documentation, v3 will make the protocol more capital-efficient, particularly cross-chain.

After v3 is live, Aave will launch its GHO stablecoin. The GHO stablecoin will be minted against collateral assets via Aave’s dApp, and will also be the native currency of Lens, the Aave team’s forthcoming web3 social media network.

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Zeller said both launches may happen “in the next few weeks.” He hinted that a portion of GHO’s revenues may be distributed to AAVE stakers.

The rollout of v3 across multiple chains will also pave the way for Aave to launch “Portals.” Portals are described as cross-chain credit lines allowing users to utilize collateral assets on multiple blockchains.

Debit Card

“If you have some LINK on Ethereum and you want to have access instantaneously to USDC Polygon, you will activate this Portal through a third party dApp and, basically, your debt will be on Polygon and your collateral on Ethereum,” Zeller said.

Aave is also making progress toward launching a debit card. “More than a year ago we tweeted about the debit card and… people forgot about that,” Zeller said. “Since then, we got the electronic money institution license and we have a full team on that.”

Zeller also noted Aave’s forthcoming wallet application, describing the dApp as a one-stop-shop for social media, DeFi, and fintech services powered by the GHO stablecoin.

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Aave’s integrations show that Aave is eyeing non-Ethereum Virtual machine chains such as the StarkWare Layer 2 network. The EVM is the core engine allowing Ethereum to execute smart contracts.

Leading Layer 1s also claimed significant market share in 2021 by offering low-cost EVM transactions. The ten largest smart contract networks are all EVM-compatible, according to DeFi Llama.

“What is exciting about StarkNet is that we will be able to basically create a v4 of Aave there,” he said. “It’s not something that is mature yet, but it will have much more eloquent mathematics, optimization, and efficiency.”

Looking ahead, Zeller predicts that liquid staking derivatives (LSDs) will be DeFi’s next major source of growth. He described the tokens as “the best kind of collateral.”

LSDs are designed to allow stakers to remain liquid, meaning they can earn staking rewards by holding a token and do not have to lock up the asset.

Staking Rewards

Lido’s stETH token, the dominant LSD token, is becoming increasingly popular in DeFi because it can be mobilized to generate DeFi yields while still accruing staking rewards. Last week, Oasis.app launched a product in partnership leveraging Aave offering users leveraged exposure to stETH.

Aave appears poised to expand its support for LSDs. A governance proposal advocating for the protocol to support Rocket Pool’s rETH token passed with 99% support in June.

Not everyone is bullish on LSDs though.

Rising Peril

In July, Danny Ryan of the Ethereum Foundation published a report titledThe Dangers of LSD warning about the rising peril for Ethereum. Ryan warned that LSDs could be a “stratum for cartelization and induce significant risks to the Ethereum protocol” should a single LSD come to amass enough staked ETH to exceed critical consensus thresholds.

During a Sep. 15 stream hosted by the Ethereum Foundation, Superphiz, the co-founder of the EthStaker community, also warned DeFi developers to be cautious about innovating on top of LSDs.

“The goal of staking is not to promote DeFi, the goal of staking is to promote the security and the health of the Ethereum network,” he said. “You’ve got to keep those two goals separate.”

However, Superphiz threw his support behind Rocket Pool, highlighting that the platform acts as a decentralized pool hosting 14,000 node operators.