DeFi lending platform Aave is evolving with its long-awaited v2 upgrade launching to public testnet. Token prices are down on the day but have been in recovery mode for the past week, more than doubling in price.
The next iteration of the decentralized flash loan lending and borrowing protocol Aave is a step closer today as it announces the launch of the public testnet for version 2.
The migration to v2 was originally announced in mid-August during the height of the DeFi boom. It promised a whole raft of improvements and financial incentives. Today’s announcement brings those features closer to fruition with the launch of a public testnet.
Aave V2 is now on the Kovan testnet!
— Aave (@AaveAave) November 11, 2020
What’s Under The Hood?
One significant change will be the ability to repay part of the collateral without having to conduct multiple transactions. Rolling this operation into one transaction will save in network fees, time, and effort.
Tokenization of debt positions will facilitate native credit delegation within the Aave protocol. This will enable more efficient position management for lenders and borrowers. There will be stable borrowing rates and fixed interest rates to enable greater predictability and avoid losses due to market volatility.
Gas fees have been the bane of the industry this year and Aave has made several improvements to limit them. V2 aTokens will integrate EIP 2612 for gasless approvals with the end goal of running on Layer 2. There are also a number of gas optimizations further reducing the burden of network fees.
Margin borrowing will be enabled to allow users to directly take long and short leveraged positions on any of the assets supported without using third-party services.
There are a number of governance updates to boot;
“V2 will be the start of what is commonly referred as ‘Liquidity Mining’ for the users of the Aave Protocol.”
The announcement added that the code is currently under four audits and formal verification, with results to be published before the mainnet launch.
AAVE Price Reaction
Aave’s native token, which migrated in late September, has actually taken a bit of a dive since yesterday’s open at $67, falling 14% to $57.
AAVE has been in full recovery mode with its DeFi brethren for the past week adding 160% in a climb from $26 to top out at $67 on Nov 11.
Total value locked (TVL) on the protocol has been in decline since its all-time high of $1.7 billion on August 31. It dropped below a billion dollars in early November but, alongside token prices, has recovered since to today’s level of $1.16 billion, making it the fifth-largest DeFi protocol by measured TVL.