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Aave is a decentralized money market protocol that users can use to earn interest on deposits or to borrow assets. Aave is an open source protocol, and anyone can freely take the code and build on it. Recently, Aave's market size exceeded $70 million. Currently Aave supports 17 different crypto assets, 6 of which are stablecoins.
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The Aave team is currently 17 people and is headquartered in London, with offices in Switzerland and across Europe to work remotely. Aave is currently working on expanding into the Asian market and is recruiting community managers in Korea and Vietnam.
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Aave was originally ETHLend's P2P lending model, why did you decide to switch to a pool-based model?
In the Aave lending pool, the liquidity deposited in the agreement will be automatically distributed to the borrowers, and the borrowers can obtain loans quickly by staking. It also gives borrowers more choice over the length of their loans - they can repay at any time as long as their collateral stays above the threshold. Lending pools make it easier for users to participate in lending.
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We understand that Aave will allow anyone to participate in the lending pool with their own parameters, can you elaborate?
Yes, starting your own pool is part of our multi-pool strategy. Initially, Aave will launch several pools to start a multi-pool ecosystem.
Our first pool is a loan pool collateralized by Uniswap liquidity provider tokens (Unitokens). This means that Uniswap liquidity providers can gain liquidity leverage by staking their Unitokens as collateral on Aave.
LEND will be used for governance and to vote on which pools can access LEND-based insurance. Liquidity providers can use their aTokens to vote and manage their pools. Users will have a greater say in how their liquidity is handled than the current governance system.
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Can you tell us more about the LEND token?
The LEND token will be the governance token of the Aave protocol. After the governance function goes live, LEND token holders will be able to vote on protocol updates and participate in the governance of the Aave protocol ecosystem.
We are exploring the use of the LEND token as a governance vote for opt-in insurance for new lending pools. Anyone can create their own loan pool with their own assets and parameters, and if the pool has a good sense of risk control, they can choose to access the LEND token-based insurance system.
The protocol has a built-in backstop module where Aave community members can deposit stablecoins. When slashing or minting new LEND, the backstop module can act as a buyer to secure a market price for LEND, and once purchased, LEND is locked for a period of time. In this way, any auctioned LEND will not flood the market in large quantities, and the protection of the LEND price will give the Aave protocol more stability.
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What is the biggest difference between Aave and other lending protocols?
An important feature of Aave is "Aave Interest-bearing Tokens" (also known as "aTokens"). When you make a deposit in the Aave protocol, you receive a corresponding amount of "aTokens", which are pegged 1:1 to the underlying asset. aTokens generate interest directly in your wallet, so you can see your balance grow every second. So you can choose to receive this interest at any Ethereum address.
The feature that has received the most attention is flash loans, which allow developers to borrow money without any collateral. Basically, they give any developer the same opportunity as the wealthiest person, if the loan is not repaid the transaction is simply reversed, so the risk is very low. Flash loans can be used for various basic tools in DeFi, not just to make money through arbitrage.
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What have flash loans been used for so far?
My favorite example is DeFiSaver, which uses flash loans many times a day. DeFi Saver lets you manage all your DeFi activities in one place. It also allows you to set up an automatic self-liquidation program, use flash loans to pay off debt, release collateral and sell some of the collateral to pay back the Aave protocol, thereby avoiding liquidation penalties.
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Aave is used as a core building block of DeFi, with new products released every week. For example, we have recently seen interest rate swaps and term deposit rates offered by Blazar and 88mph, both of which utilize Aave to provide liquidity. Both agreements are designed to allow you to earn some interest in the future.
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What experiences can be shared with those who build on DeFi?
I think Aave has done a decent job of building it, it's important to watch what other major players in the DeFi space are doing. Lots of people came up with great ideas, so we took inspiration from those ideas and improved some of them into the Aave protocol.
We also want to bring DeFi to more mainstream users, so it's important to keep the interface human-friendly, and we've spent a lot of time thinking through the process, testing and changing the UX/UI based on community feedback.
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Aave's market size has grown rapidly to approximately $70 million. What is the key to driving adoption?
We also have a large community that receives feedback on our products quickly. Aave has a strong team dedicated to bringing a good user experience to DeFi.
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What is Aave's product roadmap for the next 12 months? What is the biggest milestone of 2020?
In the near future, we will see Aave's multi-pool functionality. This means that there will be pools of lending with different lending parameters and risk characteristics. We believe that the key to DeFi is the ability to package risk and deliver it to depositors. Offering different options for various risk appetites increases liquidity. The first pool will use Uniswap liquidity provider tokens as collateral.
