Aave Money Market releases V2 weeks after AAVE transition

Aave's new version focuses on efficient capital movement and deployment of yields by protocol users with collateral swap powered by its innovative flash loan.

By · Dec 4, 2020 . 5min read

Aave Money Market V2 latest news

Decentralized money market protocol Aave has released its long-awaited Version 2 – V2 just weeks after it successfully transitioned its LEND token to AAVE and activated decentralized governance by handing over admin keys to the community.

Aave‘s new version focuses on efficient capital movement and deployment of yields by protocol users with collateral swap powered by its innovative flash loan as the most striking feature of this release.

Aave V1 locked up collaterals and didn’t afford borrowers the leverage of trading them on a secondary market. But with V2, borrowers can freely trade their deposited assets, across all currencies supported in the Aave Protocol. This effectively settles the concerns of instant liquidation due to collateral price dump. With the ability to freely trade collaterals, borrowers can hedge against adverse volatility by converting to stablecoins. Essentially, this new feature allows collateral swaps for best yields on the market.

And with collateral swaps now a reality with Aave V2 release, it has also brought in capital efficiency through its upgraded flash loan and repayment with collateral. Aave users can now opt to use their collateral to repay a loan in just a single step. This effectively reduces the risk of slippage due to the many stages of having to withdraw, borrow and deposit.

Aave’s V2 release expands the Credit Delegation feature and opens the gateway for new money markets.

Credit delegation – CD which Aave introduced during the DeFi Summer is now native to Aave V2. CD effectively allows protocol users to access liquidity without needing to deposit any collateral. Although this is now native to Aave V2, it will require developers to build on it and make it an endearing feature to explore.

Per DeFi composability and overall industry growth, Aave is making it easier for new money markets to emerge. It has done this making it easy for new and existing DeFi protocols to “copy” its solution.

And as for smart contract risks, Aave V2 has been audited by several industry security firms. MixBytes; CertiK; ConsenSys Diligence; and PeckShield were all among the security firms to audit Aave V2 codes all compiled by Certora.

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