The decentralized financial niche of cryptocurrencies exploded in 2020 and pays users interest on blocked funds (collateral) in exchange for loans. The DeFi Aave protocol recently unveiled its second version, V2, which gives the sector more potential.
“”In DeFi, the assets that were used as collateral were immobilized, but now with V2 they can be freely traded“Aave founder Stani Kulechov says in a blog post on Thursday:” Users can trade their deposited assets in all currencies supported by the Aave protocol, even if they are used as collateral. “
Several hot DeFi protocols and related assets have gained popularity over the course of 2020. One project asset, YFI, actually rose from less than $ 1,000 to more than $ 38,000 this summer. Much of the activity in the DeFi space revolves around blocking crypto assets as collateral on platforms, earning interest, and in return receiving borrowed assets that are then reallocated.
Allowing blocked assets to trade also adds settlement protection methods, the post details. Furthermore, Version two of Aave also advertises many other advances, including improvements to flash credit and the use of collateral to reconcile credit, essentially removing steps and transactions from the equation.. Previously, it would take a borrower with no external capital multiple cycles of withdrawal, repayment, and partial debt settlement to close their position.
Other updates in V2 include flash billing, batch flash credit, debt tokenization, native credit delegation, gas optimization, and loan rate fluctuations. As Aave moves on to its second version, the team has created parameters that will allow users to keep credits while the move is in progress.
“AIP-3 was recently approved to make the migration from V1 to V2 more seamless,” explains Aave’s post. “By using a migration tool based on Flash Loan, users can make a transition without having to close their V1 loan positions,” the article adds. “This migration tool will be presented later. So if you have V1 positions, you do not need to close them.”
As if these updates weren’t enough The protocol also added other safeguards for general operations. “V2 also introduces a reserve factor to fund the long-term sustainability of the DAO.”mentions the post.
DeFi is moving incredibly fast as the number of rapid developments shows, coupled with the flow of money that has quickly joined the sector.