Ethereum
Aave DAO plans to join Lido Alliance to boost staked Ethereum market
Aave a decentralized autonomous organization (DAO) evaluates a proposal to join the Pool Alliance and establish a dedicated market for Ethereum staked by the Liquid Staking Protocol (stETH) token.
THE Lido Alliance aims to promote the development of infrastructure around stETH, focusing on the recovery of use cases. This alliance was born in response to the growing domination of Clean diaperan innovative Ethereum restoration protocol that has had a significant impact on the industry since its launch last year.
Why Aave is considering the Lido Alliance
The Aave Chan Initiative explain that a dedicated marketplace would improve the user experience for wstETH holders and maintain the lending protocol as the primary platform for Lido users.
Additionally, this would allow the DAO to take a more aggressive approach on the main Aave v3 instance, allowing borrowers to pay higher rates for WETH without harming users in the long term.
The initiative also noted that a dedicated marketplace would attract new flows of WETH through Lido and potential merit incentives. He stated :
“[The] the benefits for Aave DAO are numerous. This will solidify our position as the venue of choice for wstETH loopers; improve the economics of wETH borrowing for our users and DAO, as we can opt for higher rates later; and generate capital flows from Lido Alliance incentives and new assets in a risk-isolated manner. In the long run, this increases Aave TVL, market share and revenue.
The proposal states that WETH borrowing capacity on V3 will be set at 90% of the WETH provided, with updates managed by the risk manager to ensure consistent profitability for both stETH and WETH loops. Additionally, the High Efficiency Mode (E-Mode) will be among the most efficient in the industry, at around 50 basis points.
Meanwhile, support for the move appears strong, with the Aave community approving a preliminary temperature check to launch the market last week. Following the vote, the founder of Aave Stani Kuleshov commented:
“[The] the first tailor-made Aave marketplace for the Lido goes live. Aave V3 is flexible enough to accommodate any type of risk configuration preferences based on specific needs.
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Published in: Challenge, Featured