The Aave DAO just deployed a dedicated EtherFi market on Aave. Users will now be able borrow stablecoins like $USDC, $pyUSD, and $FRAX against their weETH liquid staking tokens.

Liquid restaking tokens like weETH have introduced more advanced DeFi strategies like leveraged ETH staking, made possible by Aave's flexible architecture. Currently, the demand to borrow against weETH collateral on Aave is so high that caps are filled within minutes each week on Ethereum, Arbitrum, Base, and Scroll.

This is the second dedicated instance, following Lido's last month, and Ethena's which is currently in a final comment period in Aave DAO governance. It also provides a glimpse at Aave V4, in terms of dedicated liquidity instances and the ability to isolate risk.

This dedicated EtherFi market also shows that the Aave community is considering more curated, scalable, and liquid markets, over a higher quantity of potentially risky markets for smaller assets.