After the Black Thursday crash in March, Aave will make long collateral positions a lot less risky.
First, it came out. Then, it came out with its second version. It has many new features that should make it easier to use and more capital efficient. Interesting is its new collateral swap system powered by a new and improved flash-loan system.
People who use Aave to borrow money against their crypto assets take a long position in the crypto market. When DeFi was first started, it was in this place. Some people believe in Ethereum but want to play in other markets. They can borrow DAI from MakerDAO and do what they like without selling their Ethereum. This was nice, but it stuck a person in that ETH place.
This new version of Aave lets borrowers change their underlying collateral in a straightforward way that doesn’t use a lot of gas. They never have to leave Aave.
The company says it can be good to use collateral swaps to avoid going bankrupt in a draft blog post about the changes. People can trade their collateral for a stablecoin if the value of their collateral starts to go down, for example. This way, they don’t have to worry about price changes and possible liquidation.
A user can, of course, trade collateral now, but there are some drawbacks. It’ll probably take a lot of blocks, which means more slippage, apps, and gas. Due to the new Ethereum feature of flash loans, Aave’s collateral swaps can be opened and closed in one block.
Aave will also add more complexity to its governance system and flash loans in general while cutting gas costs across the board.
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New version: Aave has made some significant changes, but they’ll need other people to build on top of them first.
It is now built into Aave version 2. Other developers will need to develop new ways to make it work and make it into an actual product or many genuine products.
At first, credit delegating was done in a high-touch, more central way. The Aave team ran it all. With this new feature, Aave’s well-off users can now post collateral and give their borrowing power to other people in the form of tokens.
When a debt token is used, a person can borrow money from another person’s money.
People who own collateral should not give it away without some guarantee that the debt will be paid back, though. They need to build systems that will provide lenders with the assurance they need and make them more likely to hand over their debt tokens.
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Aave will also make other DeFi apps want to copy it.
She told me that the big picture is that it can be changed. The more people use Aave, the better the protocol can pay and keep up with the times.
Aave showed that it’s possible to make a public market where people can deposit and borrow crypto tokens. Now, other protocols will do the same thing with tokens that aren’t the same for everyone. For example, Uniswap and Balancer can set up markets where liquidity provider tokens (LP tokens) can be deposited to borrow other assets, like stablecoins, from other people.
As ETHLend, Aave had an ICO in 2017 that raised $16.2 million. Aave was then changed to Aave. This year, it changed its LEND tokens to the AAVE token used for governance. The governance token is in charge of making changes to the protocol. It also controls the Aave reserve. A fund made up of a small number of interest depositors earn on the money market.
With more money markets, Aave will keep the protocol going for a long time.
The new version of Aave will be run by a single person for the first month, as Aave version 1 already is. Then, all Aave holders will be able to run the new version.
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