2021-04-01 11:00:05

Aave tackles high Ethereum fees by building on Polygon’s layer 2 platform

  • 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.

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