Aave Launches Lido-Only V3 Deployment

Aave, the largest DeFi lending market, is deepening its ties with Lido, the protocol behind the top liquid staking token, stETH.

On July 29, Lido announced the launch of a dedicated v3 deployment for Lido Finance’s stETH and wstETH tokens.

Aave noted that Lido Alliance will provide liquidity incentives for users and reward builders for “novel use cases” leveraging the market. The deployment features isolated market features and a borrowing cap of 90% — up from 78.5% on the regular v3 market for stETH — with Aave describing the new platform as the most efficient platform for recursive stETH borrowing in web3.

Aave added that the launch opens the door to the deployment of additional custom pools in the future. Aave also hopes to solidify itself as the preferred DeFi venue for stETH users.

“This first specialized market is just the beginning, leading in the future to additional optimized pools with their own unique risk profiles and making Aave and DeFi more attractive to institutions and users,” said Aave Labs Founder and CEO Stani Kulechov.

“These new Markets Instances allow for use-case-oriented hyper-efficient versions of Aave while keeping risk in control, it’s a net benefit and a new frontier for the DeFi ecosystem,” said Marc Zeller, founder of Aave Chan Initiative.

Aave currently hosts $4.63 billion worth of stETH, accounting for 25% of Aave v3’s $16.4 billion total value locked (TVL) on Ethereum to rank as the protocol’s largest asset pool.

Over the past 24 hours, AAVE’s price is up 2.75% whileLido’s LDO gained 2.80%, according to The Defiant’scrypto price feeds.

Lido Alliance

The news comes as Lido is looking to play a more active role in cultivating its growth via the Lido Alliance, a recently launched collective designed to bolster the adoption of stETH.

Lido proposed the alliance in May after suffering outflows amid the rise of EigenLayer’s restaking ecosystem. While both liquid staking and restaking offer users exposure to Ethereum staking rewards without requiring they operate a node, restaking provides additional rewards for securing third-party actively validated services (AVSs) alongside points to encourage early adoption.

The Lido Alliance sought to combat EigenLayer by promoting a rival restaking ecosystem centered around stETH, quickly onboarding the Symbiotic restaking protocol and Mellow liquid restaking token provider. Symbiotic is now the second-largest staking project behind EigenLayer after its (TVL) tripled to more than $1 billion within 24 hours of raising its deposit limit in early July.

Lido’s inflows have largely subsided since introducing the alliance, with the protocol currently holding 9.88 million ETH ($33.3 billion) after attracting 740,000 ETH ($2.5 billion) since tagging a mid-April low of 9.14 million ETH.

EigenLayer ranks as the second-largest DeFi protocol with 4.85 million ETH ($16.36 billion), down 10.3% from an all-time high of 5.41 million ETH in mid-June.

Aave’s community greenlit the custom v3 deployment in June, describing the move as “supporting the launch of the Lido Alliance.”

Related: Aave Community Backs Lido Alliance, Greenlighting stETH-Focused V3 Deployment