DeFi
Aave Community Supports Lido Alliance, Greenlights stETH-Focused V3 Deployment
The Aave community has adopted a proposal to launch a Lido-focused v3 rollout, designed to facilitate recursive borrowing of stETH.
Aave, the largest Web3 lending protocol, is supporting the recently formed Lido Alliance, an initiative to promote the adoption of the stETH liquid staking token (LST).
On June 20, the Aave community pass a first proposal for temperature control to launch an instance of Aave v3 “centered on the Lido ecosystem”.
“Aave and Lido have historically experienced symbiotic growth, with stETH being one of the primary collaterals on Aave and leveraged staking being one of the most profitable use cases for Aave DAO and Lido users “, the proposal states. “Lido has engaged in incentive programs and ecosystem support for this body to seed liquidity and promote additional programs within the Lido Alliance.”
The proposal calls for the launch of a version of the Aave v3 protocol “designed and optimized to support stETH leveraged loopers.” The deployment will exclusively support Lido’s wETH and wstETH assets, with a wETH borrowing cap at 90% of the wETH provided to ensure stETH/wETH loops are “consistently profitable and cannot enter negative territory.”
Aave is the third largest DeFi protocol with a TVL of $12.3 billion, according to DeFi Llama. StETH is the largest LST, accounting for 28.8% of staked Ether for a TVL of $33.6 billion, according to Dune Analytics.
THE AAVE price is down 2.3% in the last 24 hours, according to Defiant Price Fuels. The Lido LDO token is up 3.2% over the same period.
Lido Alliance
Lido first revealed plans for its Lido Alliance in mid-May.
The alliance aims to promote the development of infrastructure built around Lido stETH, with a focus on recovery use cases. The Alliance was created in response to the growing dominance of Clean diaperthe pioneering Ethereum replenishment protocol, coinciding with a consistent trend of strong Lido outflows – with users pulling $1.4 billion of the protocol in April.
However, the trend has recently reversed, with 349,920 ETH (nearly $1.23 billion) flowing into Lido over the past 30 days, according to Dune Analytics.
The Lido Alliance quickly spawned a rival restaurant ecosystem leveraging the Symbiotic protocol. June 13, the Lido announcement that Mellow, a liquid restoration protocol based on Symbiotic, had joined its alliance. The news coincided with Symbiotic hitting its initial TVL cap of around $245 million two days after going live.
Aave to deploy on ZkSync Era
The proposal was adopted on the same day as a series of other governance measures.
On June 20, the project community adopted governance proposal to deploy Aave v3 on ZkSync Era, a top ten Layer 2 network in terms of total value locked (TVL). The launch will mark Aave’s eighth deployment on an Ethereum scaling solution and only its second on an zkEVM network after scrolling.
“The current ARFC proposes to deploy Aave V3 on zkSync to take advantage of the scalability and cost-effectiveness of zk-Rollups,” the proposal states. “By integrating with zkSync, Aave can offer users faster and cheaper transactions while maintaining the security and decentralization of the Ethereum mainnet.”
ZkSync Era is the fifth largest L2 with a TVL of $1.38 billion – with a figure that jumped 85% last week after ZkSync’s. long-awaited airdrop. The ZK token is currently trading at a market cap of $686 million after losing 42% since its launch day, according to CoinGecko.
For comparison, Scroll is the eighth L2 ranked by TVL with $759 million. Aave is already live on Ethereum, Optimism, Arbitrum, Polygon, Base, BNB Chain, Gnosis, Avalanche, Fantom, Harmony, Scroll and Metis.
The Aave community also supported proposals to deploy its stablecoin GHO on Arbitrum, launch USDC.e consolidates on Gnosis Chain and issues third round of funding 600,000 GHO to the Aave Liquidity Committee over the next three months.