Aave, a leading Web3 lending protocol, is gearing up to overhaul its governance system. The upcoming Aave Governance v3 aims to enhance accessibility and significantly boost voter participation.
Like previous Aave governance mechanisms, the new system will be fully decentralized with all events recorded on-chain. However, it will also bring several important advantages.
The standout feature of Aave Governance v3 is its transition to a multichain governance mechanism. Voting will now largely occur on the initial voting networks, either Polygon PoS or Avalanche C-Chain, with Ethereum serving as a backup option.
Previously, when voting took place on Ethereum, fees ranged from $20 to $200 depending on the network's congestion. This transition will therefore significantly reduce voting fees. Furthermore, voting will initially be free for holders of Polygon and Avalanche, as the Aave DAO will cover the voting cost.
Lower or zero voting costs should result in less friction and a higher participation rate in the governance of the protocol.
Additionally, the protocol plans to expand the variety of assets that users can utilize to participate in governance. In addition to AAVE (the protocol’s governance token) and stkAAVE (AAVE staked in the protocol's Safety Module), aAAVE (an interest-bearing token deposited in the AAVE lending pool) will be introduced as a voting asset, broadening participation.
To enhance the accessibility of the new governance mechanism, the Aave team has created a user interface application complemented by tools that assist participants in visualizing data. Based on their preferences, users can access this interface through various means: by running it locally, via decentralized IPFS deployment, or through vote.onaave.com.
With the rollout of Aave Governance v3, the protocol will also launch a.DI (Aave Delivery Infrastructure) — a cross-chain communication abstraction layer. This layer enables the Aave DAO to communicate across networks, thereby reducing the risk associated with underlying bridge providers.
To safeguard the innovations introduced by the new update, Aave intends to license its codebase. This move will prevent any entity that seeks to harm or compete with Aave from using the code in any manner.
The shift from Aave Governance v2 to Aave Governance v3 is notably more complex than usual, given its impact on a majority of Aave's smart contract infrastructure. This transition is anticipated to take 21 days. During this migration, no new governance proposals will be accepted.
Aave is one of the most advanced DeFi projects and a trendsetter in the industry. With these comprehensive changes, Aave might set a new trend for the commercialization of the DeFi space.