KEY TAKEAWAYS
- Aave’s isolated market expands its 3.2 liquid eModes to Layer 2 networks, starting with Base and Arbitrum, enhancing DeFi use cases.
- Users can leverage Lido Reward Tokens as collateral to borrow wrapped staked Ether, benefiting from reduced gas costs and third-party rewards.
- Base and Arbitrum offer optimized environments for new DeFi strategies, with Base providing low gas fees and Arbitrum offering deep liquidity.
Following the successful adoption of the Lido Protocol on the Ethereum mainnet, Aave’s isolated market is expanding its 3.2 liquid eModes to Layer 2 networks, starting with Base and Arbitrum. This expansion provides users with new opportunities to utilize Lido Reward Tokens (LRTs) as collateral for borrowing wrapped staked Ether (wstETH) and implementing decentralized finance (DeFi) use cases with third-party rewards. Additionally, users can benefit from reduced gas costs on these Layer 2 networks.
Users can now access new DeFi use cases through 3.2 liquid eModes on Base and Arbitrum, each offering unique third-party rewards and strategy possibilities. These include staking and restaking auto-compounded rewards and efficient points farming. By providing LRTs as collateral to borrow wstETH, users can leverage third-party rewards and benefits within each isolated eMode loop.
Expanding DeFi Use Cases
Each pair leverages Aave v3.2’s Liquid eModes feature to enable new DeFi use cases. On Base and Arbitrum, these markets create dedicated environments for LRT-wstETH, with parameters optimized for their use cases. Users can access these new opportunities while managing positions with reduced gas fees and faster transaction confirmations.
Base offers an optimized experience with some of the lowest gas fees in the ecosystem, while Arbitrum provides access to a mature Layer 2 environment with deep liquidity and extensive DeFi integrations. As on Ethereum mainnet, DeFi automation platforms provide tools to help execute and maintain recursive positions automatically, streamlining the experience for users.
Understanding Aave Liquid eModes
Aave v3.2 introduces Liquid eModes, a feature allowing wstETH to be eligible for multiple efficiency modes (eModes) simultaneously. This means wstETH can now be used across different market configurations with optimized parameters for each use case. For more information on Liquid eModes, check out the article here.
Users can utilize these use cases either directly through Aave or through automated platforms. DeFi automation platforms provide streamlined access, handling the entire process from initial transfer to execution, often accepting ETH, stETH, or LRTs directly.
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