Author: Nan Zhi, Odaily Planet Daily

In the past two days, the Trump family's project WLFI (World Liberty Fi) has continuously increased its holdings of AAVE, currently valued at about $1.5 million. Possibly stimulated by this news, AAVE surged 20% in 24 hours, currently reported at 385 USDT at the time of publication.

Beneath the good performance of the token price, we can see that Aave's TVL and protocol revenue data have reached new highs across the board. Meanwhile, Aave developer avara's engineering VP Emilo has released a long article previewing Aave V4 after 7 months. Aave is experiencing a new round of explosive growth in multiple aspects including products, data, and token price, and Odaily will organize details on these aspects in this article.

Fundamentals

Aave Business Overview

Aave started in 2017, its predecessor was ETHLend, with its core business being the lending protocol. The protocol earns revenue by taking a commission from the interest on user loans. Currently, Aave V3 has been deployed on 11 chains.

In addition to the lending protocol, Aave has launched its native stablecoin GHO, but its current application scope is limited and will not be elaborated here.

Core Protocol Data

According to DefiLlama data, Aave's TVL, token price, and total protocol revenue have all seen explosive growth in the past few months.

  • The TVL has surpassed the historical high of October 2021, reaching $22 billion.

  • The lowest point of the token price this year was around 80 USDT, which broke the high point of 140 USDT in March this year in early September, began to rise slowly, and saw explosive growth at the end of November.

  • The protocol's total revenue in a single day exceeded the second-highest point in September 2021, approaching the highest point at the end of October 2021. The weekly revenue has reached a historic high, with this week's income at $22.97 million, surpassing MakerDAO ranked fifth on the Ethereum network, accounting for 40% of Uniswap (the total chain revenue is basically consistent with Uniswap).

(Note: Total protocol revenue refers to all income flowing to Aave, in DefiLlama the term is 'Fee', and user income is 'Revenue', which is about 20% of the total protocol revenue in Aave.)

Recent Trends

Aave's recent actions mainly promote business scope and collaboration, including the deployment of Aave V3 on the Linea network, deposit incentives for PYUSD, and cooperation with Balancer.

  • Network Expansion: Three days ago, Aave initiated a proposal vote for deploying Aave V3 on Linea. The focus is on Aave DAO's commitment to redistributing all airdrop reward programs from liquidity mining, GHO secondary liquidity incentives, or the Linea ecosystem back to Aave users. The proposal is open until today at 10 PM, with current support at 100%.

  • Funding Incentives: An additional annualized 4% deposit incentive aimed at PYUSD has been launched, which will last for 6 months, with a target total deposit of 75 million units. If PYUSD deposits exceed this target, the incentives will be shared equally.

  • External Collaboration: Includes cooperation with Balancer to bring liquidity into the Aave market, optimizing returns for liquidity providers; launching stkGHO on Pendle, etc.

V4 Outlook

This morning, Aave developer avara's engineering VP Emilo released a long article previewing Aave V4, and Aave retweeted it, stating that version V4 is coming soon.

What are the core changes in V3?

In 2022, Aave launched version V3, with core changes in the lending protocol business including:

  • Portal System: Allows assets to flow seamlessly between Aave V3 markets across different networks, for example, burning the original A token on Ethereum and then re-minting it on Polygon.

  • Efficient Mode (eMode): Allows borrowers to achieve the highest borrowing capacity from their collateral (assets are categorized to obtain different borrowing ratios based on the type of borrowing token);

  • Isolation Mode: Limits the exposure and risk of newly listed assets to the protocol by setting specific debt caps;

What does V4 want to achieve?

According to Aave community proposals, V4 will build on the successful features of V3 (eMode, Isolation Mode, etc.) to enhance capital efficiency and strengthen integration with GHO. Its ultimate goal is to create a truly immutable and permissionless financial layer.

Unified Liquidity Layer

V4 will shift from Aave V3's monolithic, independent market-oriented design to a more flexible, fully modular design—this design concept is referred to as the 'hub-spoke' architecture, which is a further abstraction of the portal concept in version V3.

The liquidity layer manages the limits on supply and borrowing, interest rates, assets, and incentives, allowing other modules to extract liquidity from it. Compared to previous versions, the new liquidity layer allows Aave DAO to add new lending modules and remove old ones in the future without migrating liquidity.

In this architecture, eMode will no longer exist, and operations that were previously unsupported, such as collateralizing LP and borrowing RWA assets, can be achieved.

At the same time, the Isolation Mode will also cease to exist, and long-tail assets will exist on the new hub and spoke.