Decentralized liquidity protocol Aave has taken a significant step forward by deploying on the Ethereum (ETH) layer-2 scaling platform Metis. This strategic move brings an array of decentralized finance (DeFi) features and products to the Metis ecosystem and comes after Aave’s community voted in support of deploying on the zero-knowledge (zk) proof EVM zkSync. As a result, Aave can now leverage the performance enhancements provided by scaling infrastructure.
Multiple zk-proof-powered layer-2 protocols are being developed by participants within the Ethereum ecosystem, offering extensive infrastructure choices for platforms to scale. Although Aave has not yet deployed on zkSync Era, it recently announced the implementation of V3 of its protocol on the Optimistic rollup scaling protocol Metis. The collaboration between Aave and Metis spells numerous benefits for users of both protocols, including Metis users now having access to DeFi borrowing and lending services.
The key difference between optimistic rollups and zk-rollups lies in transaction processing. Optimistic rollups process transactions off-chain before publishing on-chain data with a time frame for network participants to challenge transaction data’s validity. In contrast, zk-rollups execute transactions off-chain and submit large on-chain batches using a single proof of validity, negating the need for network data validation.
Metis users can anticipate several advantages thanks to Aave’s deployment. These include borrowing assets with less collateral using Aave’s High-Efficiency mode, enhanced risk management with supply and borrow caps, and reduced exposure to potential market contagion through siloed borrowing. Furthermore, Aave’s Isolation mode expands the collateral asset pool, while Cross-Chain Portals provide access to a broader range of DeFi solutions, and Gas Optimization helps to minimize transaction fees.
Aave is well-regarded in the DeFi space, possessing over $5.5 billion in total value locked within its protocol. In January 2023, version 3 of the DeFi liquidity protocol was deployed on Ethereum’s mainnet, subsequently launching on several Ethereum layer-2 protocols such as Avalanche, Arbitrum, Optimism, and Polygon.
Even other prominent DeFi players like 1inch Network have chosen zkSync for its aggregation and limit order protocols deployment. Also, Uniswap token holders voted in favor of deploying on Polygon’s zkEVM roll-up solution in April 2023.
Implementing zk-rollups could indeed be considered “the endgame” for scaling blockchains, as stated by the Polygon Miden founder. Aave’s deployment on Metis marks another step towards realizing this endgame, promising enhanced performance, wider access, and improved user experience as the DeFi space continues to evolve.