Upgrading the Aave Protocol Ethereum V2 to V3 market directly would have indeed created some seamless experiences for the users, at the same time creates an event that would require lot of security procedures and places substantial assets at risk. While I would personally like to see the upgrade to happen, I lean towards finding more benefits on creating a completely new market for the following reasons:
Saves time and resources (can be allocated in other parts of the protocol)
Gives the Aave community also an opportunity to review the assets within the protocol
Assets could support GHO growth strategy (inc. liquidity mining)
Most importantly, new market would be more safer solution and adds less risk
Regarding your point of “well targeted liquidity mining”, it’s been discussed in a few posts and the community are somewhat against it, including myself.
I believe there could be other solutions first before looking at liquidity mining. There could be a gas refund program for the first 3 months of V3, where the treasury could refund users gas spent in migrating their positions fro V2-V3. This would mean the cost to the user migrating would be 0 and in the long run less costly for the treasury, especially at today’s gas costs.
It is up to the community and I think it will require a separate discussion if the new deployment path is chosen. But we believe that at least it is necessary to 1) as @Emilio points out, re-evaluate the listing of some assets that don’t add much currently to Aave v2 Ethereum or are directly deprecated and 2) certainly re-configure the assets to do good use of the new v3 features (ceilings, isolation mode, eMode, etc). We highly encourage a collaborator on the risk side like Gauntlet to kickstart this discussion, if/when the Snapshot vote to choose the new deployment direction passes.
Yes, that is on our radar too, given that engineering resources will be freed from the upgrade. Something to take into account is that for migrations v2 → v3 to happen via flash loans, highly probable will be necessary to have some liquidity already bootstrapped into v3. But we will check a bit better this during the following days.
I share the sentiment on liquidity mining in general, but in this case if we want to attract liquidity to allow people to migrate some kind of incentives will be needed. Refunding gas fees wont help if there are no assets to borrow in the first place, and on V2 there are some VERY large positions to migrate. Capital will be needed in any case.
A well targeted, short term liquidity mining program narrowed to a few key assets is nothing like a full fledged long term liquidity mining.
Gauntlet is supportive of a new deployment for Aave V3 Ethereum. As noted in the comments above, there is significant complexity shifting over a large system like Aave.
Should the community decide to choose the path of a new deployment, Gauntlet looks forward to supporting the community around initial listings of the V3 Ethereum market and configurations as mentioned above.
I’m very pleased by this direction – Volt Protocol originally planned Aave as its first yield venue integration but deferred because of the planned full-market upgrade of v2 to v3. Aave v2 and Compound v2 remain the most battle-tested lending markets and highly liquid yield venues in DeFi. Launching new code as a standalone product allows user choice and potentially more total users between the two pools than would exist after a forced migration.
Gradually ungoverning Aave v2 would be great to see from the perspective of a potential integrating protocol.
The Aave IPFS user interface should be verified to understand if it will properly support Aave v3 Ethereum (we will coordinate with @AaveCompanies, the maintainer, on it). This should be doable in the following 2 weeks.
Once/if the proposal about initial listings HERE is approved, we will do an extra review on all of them (e.g. oracles). We expect this to be possible in the following 2 weeks to.
The Aave governance proposal payload for the activation/deployment of the system needs to be built, among other things, connecting all the components together. This depends on all previous points, but standalone is not time-consuming for us.
Given the number of assets to be listed at the same time on v3 Ethereum, we have been working on a generalized listing engine for Aave v3.0.1 instances, that will simplify the procedure not only in this case but in following listings of any contributor. We will be publishing it this week.
Security procedures can be considered finished too, with the different reports to be published during the week. @AaveCompanies has ordered an extra audit by Peckshield, which has been successfully finished too.
We have coordinated with @AaveCompanies for the testing/QA on the Aave IPFS interface, being successful at the moment.
The process of release has been delayed, because, even with the technical aspects nailed down, Gauntlet stopped the process of initial risk parameters recommendations, requiring the other risk provider of the community (@ChaosLabs ) to take over the task. We have coordinated with Chaos, and they will have an update for the community soon.
We have been working on a migration tool Aave v2 → v3, that if approved by @AaveCompanies , will be introduced in the Aave IPFS interfaces, both for Aave v2->v3 Ethereum, and Avalanche/Polygon.
Some last points need to be addressed, but ideally, the tool could be launched even prior to Aave v3 Ethereum, for users of Polygon/Avalanche to use. We will release a more extense explainer on the tool soon.
In summary, all technical aspects including security reports are to be finished during the week. The lack of initial risk parameters recommendations has delayed slightly the timeline, but on the positive side has given some extra room to have everything around more solid.
Given that is not realistic to have a Snapshot approval on initial risk parameters before the end of the week, we advocate rolling out Aave v3 Ethereum beginning of January 2023, given that doesn’t seem to be reasonable to introduce important decisions for the community the last week of the year 2022.
An update for the community about the Aave v3 Ethereum release process.
The Snapshot vote to decide the initial assets to be listed is finished, with the community choosing the reduced initial set proposed by Chaos Labs. Aave v3 Ethereum will start with WBTC, WETH, wstETH, USDC, DAI, LINK, and AAVE.
Only 1 eMode will be active: ETH-correlated assets, including WETH and wstETH.
The initial interest rate models will follow those present on v2 Ethereum assets and other existing instances of v3, especially because v3 models are slightly different from v2 (mainly in what concerns stable rate). In the case of ETH and wstETH (enabled to borrow, even with a pretty low cap), the rate model will be the one defined on https://app.aave.com/governance/proposal/131/.
We highly recommend that risk/treasury entities of the community put a more granular definition of rate models as high-priority items. Still, we don’t consider this a blocker for activation.
The v2->v3 migration tool is in its last steps, being actively reviewed. We expect it to be out with v3 Ethereum activation, but it is possible to have some delay on it.
If the final review process goes smoothly, we expect to be creating a governance proposal for the activation of Aave v3 Ethereum this week.
An update for the community about Aave v3 Ethereum.
The technical setup for the Aave v3 Ethereum activation is finished, and, in order to have the voting running during the week, we plan to submit the on-chain proposal on Sunday: voting will start Monday and if the proposal passes, execution will be Friday 27th.
The final AIP description can be found HERE, with all the information about proposal payload.
We will keep updating the community during the following days on all the details of Aave v3 Ethereum, but we are open to any question here in the forum.
Following the correction done on the WETH rate strategy here, we have updated both the AIP description (also fixing a typo) and the proposal payload to be submitted.
No further changes have been applied from the previous version.
Proposal 147 has been executed and Aave v3 Ethereum is active, with wETH, wstETH, USDC, DAI, wBTC, LINK and AAVE listed.
The pool is accessible via the Pool smart contract, app.aave.com and all others interfaces to the Aave protocol.
Coverage/Not of Safety Module is not really part of our scope of work but from our understanding, for a new pool to be included in such coverage, there needs to be explicit approval via governance proposal, as you mention.
From a technical perspective, even if Aave v3 Ethereum is actually a 3.0.1 version with some small improvements, the core of the software is still majorly Aave v3. Assets are also (currently) a subset of the ones existing on Aave v2.
So seems legitimate to consult with the broad community about the topic, even if it is not really something on what we have influence.