The Aave DAO, which governs the leading DeFi protocol Aave, launched a custom pool designed specifically for Lido Finance stETH and wstETH. The new Aave V3 ETH Lido pool paves the way for additional customized financial solutions in the future, and opens the doors to third-party developers to build additional specialized pools to optimize specific use cases. Lido will provide liquidity incentives to users and reward builders for novel use cases of staked ETH, supporting further growth of the Lido ecosystem.
Aave’s V3 flexible architecture allows for multiple custom deployments catering to unique risk profiles such as isolated collateral markets or institutional use cases. This new Lido pool is the first custom deployment on Aave V3, and it showcases the protocol’s versatility and capability to optimize specific use cases. The deployment underscores the Aave DAO’s commitment to innovation and collaboration within DeFi, and it marks a significant milestone for Aave, further solidifying Aave’s leadership within DeFi.
“Congratulations to the Aave DAO on deploying the first custom Aave V3 ETH market for Lido,” said Aave Labs Founder and CEO Stani Kulechov. “This first specialized market is just the beginning, leading in the future to additional optimized pools with their own unique risk profiles and making Aave and DeFi more attractive to institutions and users.”
“Introducing a custom pool for stETH and wstETH on Aave underscores the growing impact of Lido’s liquid staking derivatives and opens new avenues for innovation. This development emphasizes Aave’s commitment to advancing the decentralization of Ethereum validation, as well as offering new opportunities for both users and developers to engage with DeFi in more versatile and effective ways,” said ADCV, a Contributor at Lido DAO.
“These new Markets Instances allow for use-case-oriented hyper-efficient versions of Aave while keeping risk in control, it's a net benefit and a new frontier for the Defi ecosystem," said Marc Zeller, founder of Aave Chan Initiative.
With $4.63 billion in stETH currently supplied on Aave, the custom Lido market caters to the specific needs of the Lido ecosystem and its users. For users, stETH offers an accessible way to participate in securing the Ethereum network and earn staking rewards. Unlike traditional staking, which requires a minimum of 32 ETH, stETH provides users exposure to ETH staking rewards, in any amount of ETH.
Aave and Lido have fostered a mutually beneficial relationship since Lido's stETH became the top collateral asset on Aave. This integration unlocked leveraged staking, a powerful use case that amplifies staking rewards for both Aave DAO and Lido users. The new Lido market builds on this success.
Benefits for Aave DAO
The Lido-specific market on Aave offers a multitude of advantages for the Aave DAO:
- Solidified Position as the Go-To Platform for wstETH Users: Aave expects to become a preferred venue for users who leverage wstETH (wrapped stETH with additional incentives) to maximize their staking returns.
- Improved Economics: Isolated Lido market enables Aave DAO to tune collateralization and interest rate parameters to optimize ETH borrowing dynamics, ultimately benefiting both Aave users and the DAO itself.
- Increased Liquidity: Incentives offered by the Lido Alliance, combined with the isolated risk profile of the custom market, are likely to attract significant inflows of new assets into Aave.
- Long-Term Growth: Liquid staking tokens currently comprise the largest market share of collateral assets. This strategic move to create an optimized market for liquid staking tokens has the potential to expand Aave's total value locked (TVL), market share, and revenue streams in the long run.
About the Aave Protocol
Aave is a non-custodial, open-sourced decentralized liquidity protocol that allows users to act as depositors and earn passive income, as well as borrow a wide range of digital assets without the need of third-party intermediaries. Core capabilities include risk mitigation features such as supply and borrow caps, and flash loans which allow users to borrow and repay assets within the same blockchain transaction block. GHO is a decentralized, overcollateralized stablecoin that is native to the Aave Protocol. The Aave Protocol is fully governed by the Aave Decentralized Autonomous Organization (DAO). Visit https://governance.aave.com/ to learn more and take part in Aave Governance.
About Lido Finance
Lido is an open-source, liquid staking middleware, providing a simple way to earn rewards using your digital assets. With a mission to democratize staking, the Lido middleware connects node operators and users by allowing users to self-stake their digital assets without the need to maintain hardware. Lido empowers users to self-mint liquid staking tokens which they can freely use across the DeFi ecosystem. Learn more: https://lido.fi/
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