The Cryptonomist sat down with Stani Kulechov, CEO of ETHLend and AAVE, two projects that work together in the decentralized finance field. They talked about how DeFi is becoming more and more popular.
AAVE Versus DAI
Aave has a money lending market. It differs from other Decentralized Finance (DeFi) projects in that it focuses on how assets can be used in the Ethereum ecosystem rather than how many purchases are locked. Currently, the DeFi space is measured by the value of these smart contracts, which is around $700 million.
Aave created Flash Loans to prevent asset theft or loss – this feature allows protocol users to obtain 100% uncollateralized loans. It can be utilized for arbitrage, refinancing, and liquidity.
It allows you to relocate your Dai loan from Compound to another lending technique at a better rate without repaying it. Leverage Aave’s Compound Dai loan for ETH, transmit the collateral to another protocol and return the Flash Loan. Flash loans are a new DeFi loan option. They are DeFi’s first unsecured lending option.
Flash Loan also makes depositors money through Compound to make additional money. It allows developers to create new DeFi products and return profits to Aave depositors.
The Aave Protocol wants more users by offering fixed interest rate features. The interest rate in DeFi varies based on the availability of stablecoins and demand for them. So Aave set a fixed rate for the borrower. So, the rate is the same.
Finally, Aave Interest-bearing Depositors love the new functionality of tokens (aTokens). A contract creates aTokens for every asset deposited. The holder gets the tokens. These tokens are free to move, store, and trade.
DeFi’s Widespread Adoption
At Aave, we want to bring DeFi into the mainstream, but there are some things we need to do first before that can happen. Everything that has to do with blockchain technology can be scary. Until the user experience is straightforward, it will be hard to get people who don’t know anything about crypto to use it.
If you look at GenZ and younger generations, they aren’t depositing their money into old bank accounts anymore. They don’t want their money just to be sitting in a statement, so they look for ways to make their money work for them. Many people already use DeFi, so we can’t wait to see how this turns out in the future!
It’s challenging to forecast the market’s future, but one thing is sure: the Ethereum blockchain has more developers and applications than ever.
With mass usage comes rising popularity and ETH investment. I believe the price will climb with DeFi, especially if institutional interest grows.
Doubts on Oracle Future
For Aave Protocol to work, prices must reflect real-time conditions. We chose to use Chainlink’s decentralized oracles to bring some of these loan rates/prices on-chain.
Using Chainlink allowed us to market faster than building our oracle system. Challenging to hack with Chainlink’s de Using on-chain and off-chain data, oracles will play a crucial role in the future of DeFi.
Negative View on ICOs
In 2017, Token Distribution Events ruled. However, I do not believe that fundraising via token distribution has negative consequences. That’s the present status quo in SF and London DeFi. Primarily, the token governs an open-source protocol like Aave. Like Aave’s LEND token, having a token allows us to decentralize ownership of the system and limit team control.
We are updating our tokenomics to reflect our protocol and developing an externally audited governance model. Making decisions about an Aave Protocol-based money market is critical to finance’s future. We don’t want to construct something that we would need to control. Instead, we want anyone to participate in the governance of these protocols. That’s the goal of DeFi.
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