• With the rise of DeFi since summer 2020, the Ethereum network faced congestion and high transaction fees.
  • Aave aims to address high fees on Ethereum to improve DeFi's popularity.
  • Crypto could see mainstream adoption if fees are significantly reduced. 

Aave, a decentralized lending and borrowing protocol built on the Ethereum blockchain, has announced it will scale its DeFi platform, putting its platform on several sidechains including Polygon.

The rise of DeFi and scalability solutions

The summer of 2020 witnessed the rise of DeFi, leading to the massive expansion of assets on the Ethereum blockchain. The DeFi craze has not slowed down since, with over $43 billion of total value locked within the industry’s lending platforms. While the future of DeFi seems promising, the demand for Ethereum and DeFi led to high transaction fees. 

Although Aave noted that high fees are a feature of a successful public blockchain, the firm suggested that alternative solutions are needed. The DeFi lending protocol will be exploring scalable sidechains with Polygon — formerly known as Matic Network — to address the high transaction fees on Ethereum. 

Aave founder Stani Kulechov said DeFi was intended to create a more inclusive and sustainable alternative to traditional finance. However, he added:

If DeFi is great but only limited to portfolios of five figures and up, DeFi will be falling short of its mission to finance for everyone.

While Aave was built on Ethereum layer 1, the team will scale its platform to Polygon — a layer 2 proof-of-stake sidechain that runs alongside Ethereum’s network. 

The sidechain mechanism on Ethereum refers to the enablement of tokens from the layer 1 mainchain to be used in a separate blockchain. However, it can still be moved back to the original chain if needed.

Aave added that it would use a smart-contract bridge that can seamlessly port assets from one network to the other, which will be made available soon. Aave will also have the highest standard of safety for the protocol price feeds, as Polygon is a network powered by Chainlink.

The Aave protocol aims to continue to build synergies with outer projects in order to have an Aave Market in all venues that matter. The blockchain firm believes there is no need for a “winner-takes-all” scalability solution, allowing for more freedom of choice for users. 

Ryan Selkis, founder of Messari, suggested that the Ethereum-based industry is yet to see massive adoption. He stated:

I think we’re still all underestimating what mainstream crypto adoption will look like when gas fees aren’t $100/ transaction.

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Cryptos feed Join Telegram

Recommended content


Recommended Content

Editors’ Picks

Why Polygon’s MATIC bulls could be too eager and drop the ball on this rally

Why Polygon’s MATIC bulls could be too eager and drop the ball on this rally

Polygon (MATIC) price action has been on treading nervously this week, with weekly earnings switching back and forth between profit and loss. It all comes down to trading this Friday to see if bulls can eke out a winning week.

More Polygon News

How can traders squeeze in more gains as Shiba Inu price teases a 42% rally

How can traders squeeze in more gains as Shiba Inu price teases a 42% rally

Shiba Inu price positively reacted to the United States inflation report, forming a bullish candle on its daily chart. The second-largest meme coin brushed shoulders with $0.00001287 but pulled back to test support highlighted by the 100-day Simple Moving Average (SMA) at $0.00001170.

More Shiba Inu News

CRO price sees bulls using their last ammunition to attack $0.16

CRO price sees bulls using their last ammunition to attack $0.16

Crypto.com Coin (CRO) price action is looking to execute a bullish breakout above $0.16. Ignorant bulls will try to be part of that rally, but that could prove a big mistake as a few risks need to be taken into account to be sure that this rally still has legs.

More Crypto.com News

Solana traders’ focus on $58 as the rally starts to slow down

Solana traders’ focus on $58 as the rally starts to slow down

Solana (SOL) price action is set to close out the week with a mere 7% gain depending on where it ends  Friday evening after the US closing bell. Overall it has been a good trading week from a fundamental perspective and technicals in a supporting role.

More Solana News

Bitcoin: If bulls lose control here, BTC could revisit $21,000

Bitcoin: If bulls lose control here, BTC could revisit $21,000

Bitcoin price shows an interesting setup that could reveal its next move. On closer inspection,  its technicals support a bearish outlook for the leading crypto.  

Read full analysis

BTC

ETH

XRP