Aave Exploring Polygon’s Layer 2 System to Provide Scalability and Cheaper Transactions

Aave, the third-largest non-custodial lending protocol, is taking a multi-market approach and exploring scalability solutions in a project called “New Frontiers.”

Aave is now exploring Polygon (formerly known as Matic), an Ethereum layer 2 protocol that enhances scalability using an adapted version of the Plasma framework. The Polygon sidechain system will be the first to integrate Aave as part of this plan to bring scalability and low-cost transactions.

DeFi Should Be for Everyone, Not Just Wealthy Investors

While Ethereum is the pioneer of decentralized finance, high fees and scalability have been long-time issues for the network. The team behind Aave stated that DeFi should not be limited to high net worth investors, which also discourages new users.

“If DeFi is great but only limited to certain high networth users, DeFi will fall short of its mission to be finance for everyone.” —reads the post.

As per the blog post, the protocol is building a DeFi service on Polygon, using its layer 2 system to surpass congestion and high Ethereum network fees. The protocol will enable a smart contract bridge so users can port assets from one network to another and receive part of the MATIC tokens’ transaction fees.

Additionally, Aave will be launching the Polygon Aave Market, providing an opportunity to receive MATIC (Polygon’s native token) as collateral. Other assets will be onboarded, such as USDC, USDT, DAI, WETH, AAVE, and WBTC.

Polygon’s Solution for Scalability Issues

Since it was rebranded, Polygon has been focusing on scalability on the Ethereum network. In doing so, Polygon has attracted other protocols such as SuperFarm, an NFT marketplace that will integrate Polygon’s sidechain to allow cheap NFT minting, swapping, and trading.

The number of users in the DeFi space is growing, but new users tend to get discouraged due to high fees and congestion, sparking the need for an ecosystem that can manage thousands of transactions per second without excessive gas fees.

Polygon is the 27th largest DeFi protocol. Aave is currently the most valuable integration Polygon —which is also powered by Chainlink’s oracles, providing the highest security oracle for most DeFi protocols with accurate real-time price data.