We checked what’s behind Aave’s update to V2. Here are the most important updates for users.
Aave, the money market (i.e. lending and borrowing) dApp released its second version today. (Check it out on imToken -> enter the DeFi Manger under ‘Market’).
This major update comes with a lot of useful new features and updates. Below we break down the updates you should know about and some for advanced users.
This is what Aave V2 brings for ordinary users, like you and me
Spend up to 50% less on Ethereum transaction fees.
Aave v1 would send you an aToken on deposit. Aave v2 also sends you a token on borrowing. That enables you to manage your ‘borrow tokens’ from your cold wallet.
Migration of Liquidity to V2
You will be able to migrate your positions from v1 to v2 without closing v1 manually. (Thanks to flash loans. Again.)
Aave says: “This migration tool will be introduced later, so if you have V1 positions, no need to close them.” We recommend to follow their news on when to migrate -> twitter.com/AaveAave
New features for more advanced users
Updated Stable & Variable Rate Borrowing
Aave v1 lets you borrow with stable and variable interest rates. But Aave v2 lets you borrow with stable and variable rates at the same time, with the same underlying asset, from the same wallet. That gives you the flexibility to switch at any time.
Yield & Collateral swap
Let’s say you deposited 1ETH into Aave and borrowed 100USDC. Now you can swap your 1ETH into another collateral, for example DAI. Why do I need this? If ETH drops in price, you could swap your ETH collateral into DAI - for example - to avoid a liquidation caused by the falling ETH price. In short, it helps you to minimize risk.
Second, swapping collateral makes it easier to swap into positions with higher yield - and higher risk. As always, beware of the risk.
Repayment with collateral
Similar to the collateral swap, you can now swap your collateral into a repayment of your loan. 1 step instead of the minimum of 4 steps you had to take before Aave v2.
Native Credit Delegation
Debt tokenization also enables (advanced) users to delegate credit to specific people natively within Aave. The feature will be available in the UI later.
Flash loans are loans that have to be taken and paid back within the same transaction. Usually for a small, built-in fee.
Flash loans are very new.
You might have heard about hackers using flash loans to liquidate big positions. If not, don’t worry. The good part is that Aave v2 now has built in tools to liquidate positions with the help of flash loans.
Batch Flash Loans
Flash loan multiple currencies at the same time.
General protocol updates
There are some changes to parameters on the protocol level, mostly Increased collateral capacity for USDC, BAT, LINK, UNI, WBTC and WETH and cheaper stablecoin borrowing rates.
V2 adds a Reserve Factor fee. This fee allocates a share of the protocol’s income to the ecosystem reserve to sustain the DAO and pay contributors.