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Aave V3 Ready For Solana After This Crucial Vote Passed

The Aave community has overwhelmingly approved a proposal that will set the ball rolling for deploying Aave V3 on Solana, a smart contracts platform. The motion, put forward by the Neon Foundation and the Aave Chan Initiative (ACI), passed with a majority vote of 83% based on results posted on January 21.

Aave TEMP CHECK voting | Source: Snapshot.org

Solana Fast Rising, DeFi Ecosystem Active

Solana has been rapidly expanding, with its native currency, SOL, emerging as one of the top performers in 2023. To put it in perspective, SOL prices exploded from about $10 in 2023 to around $125 by the end of the year. 

Solana price trending downward on the daily chart | Source: SOLUSDT on Binance, TradingView

This surge saw SOL reverse losses of November 2022 while concurrently catalyzing events on the blockchain, spurring various activities, including the expansion of decentralized finance (DeFi), non-fungible token (NFT), and meme coin activities. 

Related Reading: Bitcoin Price Turns Red, Why BTC Could Tumble Below $40K

On the other hand, Aave has been expanding to multiple Ethereum Virtual Machine (EVM) compatible networks, emerging as one of the leading decentralized finance (DeFi) protocols. According to on-chain data from DeFiLlama on January 22, Aave manages over $6.9 billion worth of assets across ten chains. A big chunk, over 90%, comprises assets on Ethereum. Aave v3 has a total value locked (TVL) of $4.9 billion.

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Aave V3 On Solana, What It Means

The TEMP CHECK proposers are keen on Aave v3 deploying on Solana, considering the blockchain’s rapid growth in the past year. They observe that the blockchain’s DeFi TVL and broad user base would likely benefit the lending and borrowing protocol, cementing its position as a market leader. 

If Aave is deployed on Solana, the protocol will access the deep liquidity on the blockchain. At the same time, users will access Aave services more conveniently. Subsequently, the proposers reiterated this move will cement Aave’s position as the leading liquidity market on-chain. Moreover, it will likely open up new opportunities for collaboration between the Aave, Solana, and other Neon EVM communities. 

Neon EVM is a cross-chain bridge for users to transfer assets between Ethereum and other blockchains. Through this bridge, Aave v3 will go live on Solana without any major reconfiguration of the protocol’s codebase. Among the tokens that will be initially supported is SOL. Users will be free to borrow USDC, a stablecoin.

The passing of the TEMP CHECK also reflects Aave’s ambition to expand across multiple blockchains beyond EVM networks. So far, Aave has been deployed on various platforms, including layer-2s like Arbitrum and Base, Avalanche, and Ethereum’s sidechain, Polygon.

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Aave V2 Operational, Will Bulls Break The 15-Month Resistance At $110?

All Aave v2 markets are now operational, the team behind the non-custodial liquidity protocol announced in a November 13 post on X. This a day after v3 markets were unfrozen following the approval from the community.

Aave is a platform where users can supply liquidity in exchange for rewards while borrowers are free to take loans while paying interest in a trustless environment.

Aave v2 Markets Unfrozen, Security Is “Non-Negotiable”

In the post, Aave said the security of the decentralized finance (DeFi) protocol remains a “priority and is non-negotiable for the community.”

On November 4, Aave said they received a report “of an issue on a certain feature.” After being validated, the protocol decided to take a step and pause the operation of their v2 markets on Ethereum. At the same time, some v2 markets on Avalanche were frozen. Even so, the v2 markets on Polygon were unaffected. 

Aave also froze operations on Aave v3 on Polygon, Arbitrum, and OP Mainnet. However, v3 markets on Ethereum, Base, and Metis were unaffected. 

While Aave v2 and v3 markets were frozen, the protocol clarified that users supplying or borrowing affected assets could still withdraw and repay their positions but couldn’t supply or borrow more. With those markets unfrozen, they can now continue as it was before.

Will Bulls Ease Past $110?

The resumption of services, looking at the AAVE candlestick arrangements in the daily chart, has not impacted prices. However, the token is trading at around 2023 highs and remains within a bullish formation as optimistic traders expect the uptrend to continue.

Aave price trending upwards on the daily chart | Source: AAVEUSDT on Binance, TradingView

Despite the uptrend, bulls have failed to break above the $110 resistance level. As it is, this reaction level marks August 2022 highs and has not been breached in the past 15 months. 

The token has more than doubled at spot rates, rising from $50, a critical support level marking January and June 2023 lows. For trend continuation, there must be a solid breakout above $110 and the $60 range from where prices have been moving horizontally in a multi-month accumulation.

Still, it is unclear how the token will react in the days ahead and whether there will be more upside momentum as liquidity increases as activity resumes on Aave v2 markets. 

Aave TVL | Source: DeFiLlama

According to DeFiLlama data, Aave is one of the largest DeFi protocols, with over $6 billion in total value locked (TVL). Most of these assets are locked in Ethereum, where over $5.1 billion of tokens are under management.

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Aave V3 Is Live On Ethereum, TVL Up 24% In One Month

Aave V3 is now live on the Ethereum mainnet. With this upgrade, WBTC, WETH, wstETH, USDC, DAI, LINK, and AAVE are the only supported assets. 

Aave V3 Improves Capital Efficiency

Stani Kulechov, the co-founder of Aave, said V3’s flexible design introduces new ways of mitigating risks, reducing gas costs, and improving capital efficiency, all while ensuring better liquidity decentralization.

This upgrade came after the Aave community delayed the upgrade. Then, Aave developers assessed that immediately improving V2 Pools to V3 would not have yielded the desired level of compatibility with other Aave V3 pools running on Avalanche, Polygon, and Ethereum layer-2 platforms.

The current Aave V3 on Ethereum has been reworked. It is negligibly complex and more compatible with other Aave V3 pools outside of Ethereum.

The transition to Ethereum, expanding Aave’s presence in top blockchains, didn’t immediately affect its total value locked (TVL). Data show that it is 2% lower in the past 24 hours. However, TVL is up 24% in the last month, rising to $4.56 billion as of the time of writing on January 27, according to data streams from DeFiLlama.

Aave is now the fourth largest DeFi protocol by TVL, trailing Lido Finance, MakerDAO, and Curve. However, the dApp is the second-largest lending protocol by TVL, behind MakerDAO. By launching on Ethereum, and upgrading from the original V2, the protocol’s TVL might gradually increase over the coming weeks or months. 

This, in turn, may positively impact AAVE prices.

AAVE Prices on January 27

Aave is a decentralized money market, allowing crypto holders to actively lend and borrow various assets. Integrating V3 on Ethereum avails the protocol on six other platforms, including Avalanche, Polygon, and Harmony. Polygon is compatible with Ethereum’s virtual machine, existing as a layer-2 protocol enabling higher scalability and significantly lower trading fees.

What Aave V3 Brings 

Developers claim Aave V3 introduces various changes that, as the co-founder said, make lending and borrowing more seamless and cheaper. 

According to the protocol, this version is optimized to reduce gas costs by around 20-25% across the board. Users can also move assets across all Aave markets, irrespective of the network. By launching on Ethereum, Harmony users, for example, would be free to transfer assets and participate in Aave V3 markets on the most active platform. 

Aave V3 introduces the “Isolated Mode” where Aave governance can vote to list new tokens as isolated assets with specific debt ceilings. Aave clarifies that the debt ceiling is the maximum USD reading that a borrower’s collateral can cover. Only approved tokens, mostly stablecoins, can be borrowed in this mode.