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Aave Supports Lido with New Deployment

Aave supports Lido by launching a Lido-focused deployment of Aave v3.

This initiative aims to facilitate recursive stETH borrowing. Aave, the leading web3 lending protocol, is backing the recently-formed Lido Alliance to promote the adoption of the stETH liquid staking token (LST).

Proposal Approval

On June 20, the Aave community approved a proposal to launch an instance of Aave v3, specifically focused on the Lido ecosystem. The proposal highlighted the historical symbiotic growth between Aave and Lido, with stETH being a premier collateral on Aave. Leveraged staking has proven profitable for both Aave DAO and Lido users. Lido has committed to providing incentive programs and ecosystem support to bootstrap liquidity and promote additional programs within the Lido Alliance.

Deployment Details

The deployment of Aave v3 will be designed to support stETH leverage loopers. It will exclusively support wETH and Lido’s wstETH assets, with a borrowing cap for wETH set at 90% of supplied wETH. This ensures that stETH/wETH loops remain consistently profitable and cannot go into negative territory.

Aave and Lido Statistics

According to DeFi Llama, Aave is the third-largest DeFi protocol with a total value locked (TVL) of $12.3 billion. StETH is the largest LST, accounting for 28.8% of staked Ether with a TVL of $33.6 billion, according to Dune Analytics. The price of AAVE has dropped 2.3% in the past 24 hours, while Lido’s LDO token has risen by 3.2%.

Lido Alliance

Lido announced the formation of its Lido Alliance in mid-May to promote the development of infrastructure around stETH, focusing on restaking use cases. This move came in response to the dominance of EigenLayer and heavy outflows from Lido, with $1.4 billion withdrawn in April. However, the trend has reversed, with 349,920 ETH (nearly $1.23 billion) flowing into Lido over the past 30 days.

The Lido Alliance has also given rise to a rival restaking ecosystem leveraging the Symbiotic protocol. On June 13, Lido announced that Mellow, a Symbiotic-based liquid restaking protocol, had joined its alliance. This news coincided with Symbiotic reaching its initial TVL ceiling of approximately $245 million two days after launch.

Aave on ZkSync Era

On the same day, Aave’s community passed a governance proposal to deploy Aave v3 on ZkSync Era, a top ten Layer 2 network by total value locked (TVL). This will be Aave’s eighth deployment on an Ethereum scaling solution and its second on a zkEVM network after Scroll. The proposal aims to leverage the scalability and cost-efficiency of zk-Rollups, offering users faster and cheaper transactions while maintaining the security and decentralization of the Ethereum mainnet.

ZkSync Era is the fifth-largest Layer 2 with a TVL of $1.38 billion, a figure that jumped 85% following ZkSync’s long-awaited airdrop. The ZK token currently has a market cap of $686 million, down 42% since launch, according to CoinGecko.

For comparison, Scroll is the eighth-ranked Layer 2 by TVL with $759 million. Aave is already live on Ethereum, Optimism, Arbitrum, Polygon, Base, BNB Chain, Gnosis, Avalanche, Fantom, Harmony, Scroll, and Metis.

Additional Proposals

Aave’s community also backed proposals to deploy its GHO stablecoin on Arbitrum, launch USDC.e pools on Gnosis Chain, and issue a third round of funding of 600,000 GHO to the Aave Liquidity Committee over the next three months.

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Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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