AAVE Labs Proposes V4 Upgrade, Secures Bold $25 Million DAO Funding

Aave Labs has proposed a Temp Check for the upgrade of the core architecture of the protocol to Aave V4, requiring $25 million in funding from the DAO. The upgrade focuses on improving scalability, modular development, and liquidity management, while directing all product revenue to the DAO.

The V4 proposal readies Aave for wider adoption by retail and institutional participants in the decentralized finance (DeFi) space. Under the proposal, revenue generated from Aave-branded applications, interfaces, and enterprise tools would flow entirely to the DAO, rather than remaining with Labs.

“The framework establishes Aave Labs’ position as a committed contributor to the DAO over the long term, based on a token-centric framework where 100% of product revenue is contributed to the community,” said Stani Kulechov. As fintechs and institutions enter DeFi, the framework puts token on the path to capture the largest growth markets over the next decade.

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Aave V4 Strengthens DeFi Governance Framework

Aave V4 is designed to simplify the process of launching new markets and financial instruments, without requiring significant changes to the existing infrastructure. The new version of Aave V4 will also feature markets with tailored risk and reward models, allowing institutional investors to join while ensuring the stability of the protocol as a whole.

Currently, the token generates the majority of its revenue from lending. However, the new framework proposed by token V4 seeks to diversify the revenue streams by directing the revenue generated from other financial products developed by Labs into the DAO treasury, aligning the interests of token holders.

The proposal further recommends the establishment of a foundation specifically dedicated to the protection of the token brand and its intellectual property. Further voting will determine the activation of V4 and the allocation of funds.

In order to implement the upgrade, Labs proposes that the DAO provide funding of $25 million in stablecoins and 75,000 tokens for a period of one year. The funds will be used to facilitate development, audits, product development, and marketing.

The proposal, if passed, could be one of the most important upgrades in the history of the protocol, solidifying its place as one of the leading DeFi protocols and paving the way for its eventual development into a full-fledged financial infrastructure controlled by the DAO.

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