Why AAVE and MetisDAO integration could be a Game Changer; For Layer 2 and Defi ecosystem
After a successful vote, Aave will be deploying on Metis Andromeda!
Aave, which is an early DeFi protocol is growing across a variety of different blockchains (Ethereum, Polygon, Avalanche, Arbitrum, etc), in an effort to attract more mainstream users and retool for a considerably bigger market opportunity in crypto lending teams up with Metis.
Founded by Stani Kulechov in 2017, Aave was originally called ETHLend. Aave is a decentralized non-custodial borrowing and lending protocol that lets users deposit assets into liquidity pools to earn interest and borrow assets at a variable or fixed interest rate.
Following the Metis-Aave integration, users might think about spreading their risk by diversifying their DeFi investments to include alternative lending and borrowing protocols. The DeFi ecosystem, however, has benefited greatly from the popularity and profitability of Aave, and it is probable that this will be the case for some time to come since Aave will be deployed on the Metis Andromeda Network.
Aave first made use of the Ethereum blockchain before making its way to Polygon. As of right now, these two blockchains constitute the foundation of Aave, enabling it to have a global presence without using intermediaries in user interactions.
Aave began in January 2020 and gained traction in the DeFi market right away, causing changes in the TVL (total value locked) of other ecosystems. For instance, competing lending protocols like Compound and MakerDAO experienced a decline in TVL when Aave initiated its liquidity mining campaign in September 2020. Also noteable, since the debut of Aave, the TVL in Compound Finance has reduced. Compound’s TVL dropped from over $900 million to around $400 million in a matter of weeks after Aave’s launch. This is because Aave provided consumers with a greater selection of assets to borrow from and lend money against at better interest rates. Hence, its expected that the TVL of Metis should increase once Aave launches.
Notable occurrence happened on May 18, 2021, when Aave, the largest protocol on Ethereum in terms of TVL, hit its all-time high of $17.4b, similarly, Aave’s TVL on Polygon was $46.5 million as of June 2, 2021. By June 5, 2021, just three days later, Aave’s TVL on Polygon had increased to $565 million.
Aave capitalizes on this market by offering a decentralized lending system where users may lend, borrow, and produce yield by depositing cryptocurrency. Lending is one of the most well-liked use cases of DeFi in 2021. In fact, four out of TVL’s top five DeFi initiatives are lending protocols, with Aave presently holding the top spot. As of now, Aave TVL is currently at $5.57b according to DefiLama.
It is important to note that Aave’s protocol is highly composable, which enables it to be combined with a variety of different DeFi protocols and dApps. This is important in terms of DeFi composability with Aave. Aave’s composability has made it possible for it to establish itself as a fundamental component of the DeFi ecosystem. Thus, this integration with Aave will create diversifications, like using it as a source of liquidity or including its flash loans into their smart contract logic, and this will led to a range of new DeFi products and services.
It’s challenging to provide a general answer regarding viable tactics now that Aave is on the way, as they will depend on many elements such a person’s risk tolerance, investing objectives, and market conditions. Nonetheless, there are a few possible approaches that investors might think about:
- Direct investment in Aave: Given Aave’s dominance in the DeFi market, purchasing Aave tokens (AAVE) or Metis token would be an easy method to get a piece of the integration’s success.
- The loan and borrowing functions of Aave can be a helpful tool for producing money or gaining access to liquidity in the DeFi market.
- Giving liquidity to Aave: Aave’s liquidity mining program compensates users who give the protocol liquidity with AAVE tokens, making yield farming a viable alternative.
- Putting money towards initiatives that integrate with Aave: Because Aave is a composable protocol, many other DeFi protocols are constructing on top of it. Finding and funding projects that integrate with Aave may be a way to participate in both of their successes.
This integration is set for a whole new level of milestone in the Defi and layer 2 ecosystem as it is set to unleash greater benefits to users across the ecosystem. These benefits might come in as; More yields, capital efficiency, protocol safety, decentralization, and user experiences.
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