Aave Launches EtherFi-Dedicated V3 Deployment

Aave has launched its second v3 deployment dedicated to providing markets for a single asset.

On Sept. 9, Aave launched a v3 iteration focused on facilitating stablecoin lending against EtherFi’s Wrapped eETH (weETH), the largest Ethereum liquid restaking protocol.

The protocol exclusively supports weETH as collateral and allows users to borrow Cricle’s USD Coin, Paypal’s PYUSD, and Frax’s FRAX stablecoins against deposits up to a loan-to-value ratio of 78%. Aave said the deployment was inspired by rabid demand for weETH on its main v3 platform.

“Currently, the demand to borrow against weETH collateral on Aave is so high that caps are filled within minutes each week,” Aave tweeted. “This new deployment will provide users with enhanced capabilities and improved liquidity options with an isolated market that will support EtherFi assets, specifically weETH.”

Mike Silagadze, the CEO of EtherFi, noted that EtherFi’s upcoming crypto credit card, Cash, will leverage the new Aave v3 deployment to allow users to borrow stablecoins against their assets to make payments at physical merchants.

“This market will be a key cog in our EtherFi cash product, allowing users to make real-world purchases while borrowing against their crypto,” Silagadze said.

The price of AAVE is up 1.3% over the past 24 hours, according to The Defiant’s crypto price feeds. EtherFi’s ETHFI tokenis also up 2.5% over the same period.

WeETH currently boasts a $3.88 billion market cap, according to CoinGecko.

Strategic pivot

The new instance of Aave v3 is the latest example of the project’s strategic pivot towards launching bespoke, dedicated markets for new assets rather than onboarding an increasing number of assets on the main Aave v3 deployment.

“This dedicated EtherFi market also shows that the Aave community is considering more curated, scalable, and liquid markets, over a higher quantity of potentially risky markets for smaller assets,” Aave said. “It also provides a glimpse at Aave V4, in terms of dedicated liquidity instances and the ability to isolate risk.”

The product follows Aave launching its first dedicated instance in the form of a deployment focused on Lido’s stETH liquid staking token on July 29. The protocol aims to offer the most efficient platform for recursive stETH lending, boasting a borrowing cap of 90% — compared to 78.5% on the regular v3 market for stETH.

Aave’s Lido deployment has already attracted a total value locked of $487.3 million, which would position it as the 46th-largest DeFi protocol, according to DeFi Llama.

Aave noted that a proposal to launch an Aave instance dedicated to supporting Ethena’s yield-bearing USDe stablecoin is currently undergoing its final governance comment period. The token was onboarded to the Aave v3 platform in June despite Aave previously criticizing MakerDAO for hastily onboarding the token.