Aave v4 inches toward debut on Ethereum with near-unanimous vote

A forthcoming version of the multibillion-dollar Aave protocol dubbed “v4” cleared an initial hurdle on Monday when Aave DAO voted to launch the “next-generation credit infrastructure” on Ethereum.

Aave v4 still faces another vote in the coming weeks. But its near-unanimous support from the DAO was significant, as its impending release had become a point of contention within the DAO.

The current version of the protocol, Aave v3, is the largest in decentralised finance, with more than $25 billion in user deposits. But its creator Aave Labs has pushed for the DAO to turn its attention to v4.

That push was among several issues that led to the acrimonious departures of two major contributors to the DAO, Bored Ghosts Developing and Aave Chan Initiative. Both have said they will not seek DAO renewal of their contracts this year.

Last month, Aave Labs proposed pausing work to improve v3 and even changing its lending and borrowing parameters in order to compel users to migrate to v4.

Bored Ghosts said it was a step too far.

“We believe even proposing this on the main revenue-maker & fully functional engine of Aave, is borderline outrageous,” it wrote.

Labs later backtracked, saying there would be “no forced migration.”

“While we think it is important for the DAO to align strategically behind V4 as part of this proposal, the timeline is up for discussion,” Labs wrote in the Aave governance forum.

“Aave V3 is a battle-tested protocol, and it will continue to operate as a core part of the ecosystem for as long as the DAO decides it should.”

Still, Labs says v4 will dramatically expand the amount of revenue the DAO can collect through a hub-and-spoke model that allows for tailored lending markets without fracturing liquidity.

“At launch, [v4] will serve V3 users with higher capital efficiency and more advanced features,” the company previously wrote.

The proposal approved on Monday by the DAO prioritises security over “immediate growth.”

“It will bring V4 online with conservative parameters and minimal assets,” the proposal reads. “When live conditions support it, the DAO can lift caps, extend or resize credit lines, onboard additional assets, and configure new Hubs or Spokes.”

Aleks Gilbert is DL News’ New York-based DeFi correspondent. Have a tip? Email him at aleks@dlnews.com.