Aave Extends Its Reach to Mantle: A Dual Strategy of Expansion and Consolidation

Aave has recently established a new partnership with the Mantle Network, aiming to enhance institutional-level lending liquidity within the rapidly expanding Layer-2 ecosystem.

Key Takeaways

Aave has partnered with Mantle Network to enhance institutional-grade lending liquidity on its Layer-2 platform.
The integration will support prominent cryptocurrencies and introduce more pairs in future updates.
Simultaneously, the Aave DAO is reevaluating its multichain strategy due to underperforming chains.
Chains generating less than $3 million in annual revenue may face stricter requirements or closure.
Aave's revenue approach will prioritize financial guarantees from new deployment chains, changing the dynamics of DeFi expansion.

Aave expands to Mantle — even as the DAO prepares to shut down low-revenue chains

At the same time, Aave’s governance documents indicate that the decentralized autonomous organization (DAO) is planning significant structural changes. This includes the potential closure of operations on lesser-performing chains and the implementation of stricter revenue criteria for future expansion efforts.

Aave Enhances Institutional Liquidity on Mantle

On December 2nd, Aave announced its launch on Mantle, positioning its Aave V3 as a main liquidity engine for Mantle’s Layer-2 framework. The initial rollout supports prominent digital assets such as ETH, USDC, and USDT, with plans to introduce more asset pairs in subsequent phases.

Mantle has emphasized that this integration aims to deliver institutional-quality decentralized finance (DeFi) liquidity on a global scale, designed to boost lending markets and attract significant capital investments. This expansion comes in response to Mantle’s rising activity in Layer-2 user engagement, growth in Total Value Locked (TVL), and its broader ambition to attract liquidity from enterprises and funds.

With this integration, Mantle users can now borrow, lend, and leverage assets through Aave’s innovative V3 platform, benefiting from features like risk-segmented liquidity pools, an isolation mode, and cross-chain capabilities via portals. Essentially, Mantle gains access to a proven DeFi money market, while Aave strengthens its foothold within top-performing Layer-2 solutions.

Aave's Internal Strategy: Preparing for a Multichain Shift

However, a Temp Check posted on Aave’s governance forum reveals a more intricate situation behind the expansion initiative. The proposal indicates that Aave’s multichain strategy has not yielded the expected results, with several chains failing to generate significant revenue or attract users.

The DAO is contemplating a comprehensive strategic adjustment, noting that certain chains have only been generating between $3,000 and $50,000 in revenue annually, which is significantly lower than the operational and engineering costs required for their upkeep.

Chains earning less than $3 million in annual revenue—including Polygon, Gnosis, BNB Chain, Optimism, Scroll, Sonic, and Celo—will see increased Reserve Factors implemented to enhance profitability. Should revenue not improve significantly within a year, these chains may be at risk of being phased out.

This marks a pivotal moment for Aave, signaling that its network presence is tied to real economic value. Moving forward, any new chain wishing to deploy Aave V3 must ensure a minimum revenue guarantee of $2 million per year. This new rule will likely transform the approach to DeFi expansion, placing financial responsibilities on chains rather than solely depending on Total Value Locked (TVL) or user incentives.

Balancing Growth and Streamlining Operations

While Aave has launched on Mantle, data indicates that the majority of its revenue is concentrated among a few key chains. The Temp Check suggests that Aave should concentrate on high-impact deployments and avoid spreading its resources too thin across lower-yield networks.

Conclusion

Aave's efforts reflect a dual strategy: expanding its influence through new partnerships while also making necessary adjustments to consolidate and streamline its operations. As the DeFi landscape continues to evolve, these developments will be vital to ensuring long-term sustainability and profitability in the face of changing market conditions.