What’s your elevator pitch for Aave?
Aave Protocol allows users to receive yield on their cryptographic holdings directly interacting with the yield source transparently without giving up custody of your funds.
The mission has been to create an interest rate market that is transparent and governed/owned by the community.
We started with Ethereum naturally since the ecosystem has grown a lot over the years and now has an interest rate market in Polygon and currently the Aave community is looking to ship more markets in other networks.
The Aave community is known, maybe mostly, to love and embrace innovation, our secret sauce is to ship innovation frequently and securely, difficult to master but important for scaling.
What about DeFi has changed the most since Aave’s (formerly ETHLend’s) release in 2017?
When we started in 2016/2017 there wasn’t DeFi – there was only EtherDelta, a DEX, around but nothing else. The concept of composability wasn’t a thing as there weren’t building blocks to play around with.
I still remember when there weren’t stablecoins on Ethereum and our users (back when we were ETHLend) were borrowing ETH against tokens.
The concept of composability and yield definitely spiked interest during the end of 2018 for the whole space.
DeFi started to become an ecosystem that is now feeding itself, besides receiving yield, today the concept of governance started to grow more widely and it’s amazing to see that most of the important DeFi protocols such as Aave are community governed.
Also, DeFi became more advanced – we see more and more complex protocols being built.
The cool part is that anyone in any part of the world could create the next Aave Protocol. Permissionessless access to use DeFi means also permissionessless access to build DeFi.
Beyond leverage for trading, what are the next most practical use cases for on-chain lending and when do you think those use-cases will mature? What, if anything, is holding them back?
I think options could be cool – now that we have loads of exposure in the space, it brings the opportunity to hedge various exposures, even deposits into protocols like Aave.
We are also looking into fixed yield, fixed borrow, NFTs as collateral, interest rate swaps – plenty of things that could serve the Aave ecosystem including under collateralized borrow transactions with the Aave credit delegation.
Can you please elaborate a bit on how a credit delegation vault can be built?
So pretty much you create a smart contract where Aave depositors can delegate their borrowing power, then your vault can do the borrowing behalf of the delegates and you can borrow what you need like USDC.
How would a depositor trust a credit delegator though, would the Aave Protocol endorse them somehow?
It’s completely trust based.
You can delegate to your friend or to an institution that carries reputational risk and you expect them not to do crazy stuff. This is all between the users / participants themselves.
That is why it’s next level. 🙂
You mentioned on Twitter that institutions were already testing the Aave Protocol, do you have any details?
I love the idea of decentralized credit risk underwriting.
There could be even decentralized credit risk agencies that give assessments which upon based protocols underwrite.
The Aave Companies are currently developing a market specifically tailored for institutional usage, which would be a soft launch to use Aave Protocol before participating on the main market.
The institutional market has been positively received and we expect a lot of traction for it especially as DeFi is becoming more and more interesting within the TradFi realm.
What other layer 2s or chains does Aave plan to support in the future? In what ways will interoperability shape the Aave community?
The supported chain really depends on the community sentiment. There is sentiment expressed for the past months for xDai (sidechain), Arbitrum, Optimism and Polkadot (another chain), the latter three are not so ready in their infra but would believe being suitable for later this year.
Interoperability is key for the Aave protocol, especially 80% of the liquidity actually comes from outside the GUI, meaning folks that build other products on top of the protocol.
What inspired the name Aave? For those who don’t know, Aave comes from the Finnish word for “ghost.”
The name comes from the fact that ghosts are transparent — because all information and transactions in DeFi is transparent, available 24-7, for anyone to see at any time. 👻
Thanks for reading and thank you Stani for a fantastic interview.