In a significant move to advance its decentralized finance (DeFi) ecosystem, Aave governance has approved a $12 million GHO grant to Aave Labs for the development of the Aave V4 protocol. This 12-month initiative will fund both the technical advancements and the creation of new visual identity assets for Aave.

Funding and Development Schedule

Aave Labs will receive an initial 3 million GHO upfront, with the remaining funds distributed gradually over the year. This financial backing comes as part of an Aave Improvement Proposal (AIP) that emphasizes a comprehensive development approach.

The proposal states, “This AIP proposes a one-year technical contributor engagement for Aave Labs to act as a service provider for the development of Aave V4 and a new visual identity.”

Strategic Roadmap

Avara, the parent company of Aave, GHO, and the Lens social graph, laid out ambitious plans for Aave V4 and beyond. Announced in May, the roadmap includes:

1. Aave V4 Rollout: Scheduled for mid-2025, featuring a modular architecture for improved integrations, automatic interest rate adjustments powered by Chainlink, and an updated liquidation engine.
2. Cross-Chain Liquidity Layer (CCLL): Expected to aggregate liquidity from multiple chains, with a projected launch in 2026 or 2027.
3. Layer 2 Network: A bespoke network, Aave Network, set to follow the V4 launch.
4. Real-World Asset Products: Leveraging GHO to promote these products.
5. Expansion to Non-EVM Networks: Deploying Aave on networks not supporting Ethereum Virtual Machine (EVM) smart contracts.
6. New Visual Branding: Development of logos, color schemes, typography, and other graphic elements to refresh Aave’s visual identity.

Enhancements and Features

The Aave V4 protocol is set to include several key improvements:

• Modular Architecture: Enhancing efficiency and ease of integrations.
• Interest Rate Adjustments: Automated adjustments based on Chainlink data.
• Risk-Based Premiums: Interest rate premiums for higher-risk assets.
• Liquidation Engine: Updated mechanisms for handling liquidations.

Additionally, GHO-related upgrades are planned:

• Interest Payments in GHO: Allowing interest payments to asset suppliers in GHO.
• Efficient GHO Minting: Streamlining the minting process.
• Soft Liquidation Mechanism: Inspired by Curve’s LLAMA mechanism, converting collateral into GHO during market downturns to avoid liquidation, reverting to the original asset when values stabilize.

Progress and Reporting

Aave Labs is committed to providing monthly progress reports to the Aave DAO, ensuring transparency and accountability throughout the development process.

The $12 million grant signifies Aave’s commitment to maintaining its position as a leading DeFi protocol by continuously innovating and enhancing its platform. With Aave V4’s development and the strategic roadmap, Aave aims to solidify its ecosystem’s robustness and broaden its appeal across the DeFi landscape.