Layer-2 Ethereum protocols continue to draw the attention of decentralized finance’s (DeFi) leading entities. Case in point, Aave, a dominant liquidity protocol, has extended its reach by launching on the Metis scaling network.
Aave, a decentralized liquidity protocol, has recently established its presence on Metis, an Ethereum layer-2 scaling solution. This move adds an array of DeFi products and features to the ever-expanding Metis ecosystem.
The AAVE community, with the token trading at $55.78, recently passed a proposal to initiate the deployment on the zero-knowledge Ethereum Virtual Machine (zkEVM) platform known as zkSync Era. This move allows Aave to leverage the considerable performance enhancements offered by this scaling infrastructure.
The Ethereum landscape is witnessing the development of numerous layer-2 protocols, powered by zk-proofs, offering developers a range of choices to enhance their platform’s scalability.
Although Aave hasn’t yet embarked on zkSync Era, the liquidity protocol has publicized the launch of its v3 protocol on the Optimistic Rollup scaling platform, Metis. Users on both protocols are set to benefit from the latest iteration of Aave’s protocol, with Metis users particularly poised to reap the rewards of DeFi lending and borrowing services.
Ethereum.org delineates the key distinctions between Optimistic Rollups and zk-Rollups. The former conducts transactions off-chain, later posting data on-chain, providing a window for participants to question the validity of transaction data. In contrast, zk-Rollups perform transactions off-chain and submit substantial batches on-chain using a single proof-of-validity, negating the need for network-wide data validation.
The Metis team has outlined several advantages to users resulting from Aave’s integration. These include the option to borrow assets with reduced collateral using Aave’s “high efficiency” mode, improved risk management through supply and borrowing caps, and isolated borrowing to minimize exposure to potential market volatility.
Aave’s “isolation” mode also enlarges the collateral asset pool. The protocol’s cross-chain portals unlock wider DeFi solutions, and its gas optimization further trims transaction costs.
As a prominent figure in the DeFi domain, Aave has over $5.5 billion in total value locked in its protocol. The third version of this liquidity protocol was rolled out on Ethereum’s mainnet in January 2023, after its launch on multiple Ethereum layer-2 protocols including Avalanche (AVAX), Arbitrum (ARB), Optimism (OP), and Polygon (MATIC).
1inch Network, another notable DeFi entity, also opted for zkSync to launch its aggregation and limit-order protocols. Additionally, in April 2023, Uniswap (UNI) token holders voted in favor of deploying on Polygon’s zkEVM roll-up solution.
Understanding the implications of this move can be simplified by diving deeper into the roles of both parties. Aave, one of the most successful decentralized lending platforms, enables users to earn interest on deposits and borrow assets. On the other hand, Metis, an Ethereum layer-2 scaling solution, aims to address the network’s scalability issues, allowing for faster and cheaper transactions.
The marriage of these two entities brings several advantages. Aave’s integration with Metis means that users can engage with DeFi lending and borrowing services more efficiently, experiencing reduced fees and faster transactions. This integration also demonstrates the power of layer-2 solutions, bringing to life the vast potential of the Ethereum network when scalability and speed concerns are addressed.
Lastly, the role of zkEVM platforms like zkSync Era shouldn’t be overlooked. These platforms harness the power of zk-SNARKs to provide superior scaling solutions, further enhancing the Ethereum network’s performance and the user experience. As we move forward, it will be interesting to see how other DeFi entities navigate the rapidly evolving landscape of Ethereum layer-2 scaling solutions.