Decentralized lending giant Aave (DeFi) has unveiled a proposed redesign of its V4 protocol, which aims to improve user position management and integrate new features for a more streamlined user experience.
A complete overhaul of the protocol
Aave's V4 protocol redesign proposal aims to deliver a more simplified user experience by introducing profiles and vaults for more efficient position management. The redesign also includes major enhancements and extensions to the Aave network, a level of inter-chain liquidity, deployments of the first non-Ethereum Virtual Machine (EVM) layer and a new visual identity.
A completely new architecture
Aave V4 will be built on a completely new architecture, which will include a unified liquidity level to enable better integration of features such as isolation pools, risk modules and its native stable GHO currency. Interest rates will also be able to adjust automatically according to market conditions, using Chainlink data oracles.
Enhancements for GHO
The redesign proposal also includes improvements for GHO, Aave's algorithmic stablecoin, which was launched in July 2023. Suggestions for GHO include improvements to the liquidation engine, such as variable liquidation bonuses and "soft" liquidations, as well as tighter GHO integrations, such as options to earn interest. An emergency repayment mechanism for GHO depegging scenarios has also been proposed.
A staggered development process
Aave's V4 development process is spread over several stages, from the end of research in Q2 2024 to full production release of V4 in mid-2025. Aave Labs, the company behind the Aave protocol, has requested a community evaluation before moving to a blockchain vote.
