Following the recent addition of Enjin Coin (ENJ) to their DeFi protocol, we hosted a live AMA with Aave's COO Jordan Lazaro Gustave.
Here's what Jordan had to say about decentralized finance, Aave V2, and more.
Jordan: Yes you can! The Aave Protocol is a featured DApp in the Enjin Wallet, so if you go to the Enjin DApp browser, you can access the Aave Protocol directly.
Jordan: ENJ holders can deposit their ENJ in the Aave Market and earn interest on that ENJ. When you deposit ENJ to Aave you receive a corresponding amount of aENJ pegged 1:1 to the underlying ENJ which accrues in your wallet balance
ENJ holders can also use their ENJ as collateral to borrow stablecoins and other assets offered in the Aave Market. This collateral use is useful if you need money for something and you don't want to sell off your valuable assets.
For example, if you're long on ENJ and you don't want to sell it and miss the price rise, but you need money to buy a laptop, you can use your ENJ as collateral to borrow a stable coin like USDC and buy yourself that laptop.
Jordan: We recently released our “Aavenomics” proposal for moving toward more decentralization where users get to vote on the governance of the protocol.
Currently, the governance is on the Ropsten testnet if you wanna check it out:
Aave Governance on Testnet: Seize the Power
As the Aave team continues its path towards more decentralization, we’re happy to introduce the launch of governance on the Ropsten testnet and invite our community to participate in the first votes on AIPs.
Once governance is live on Mainnet, the first governance vote will be on the token migration from the LEND token to AAVE.
LEND token holders can vote with LEND that has been deposited in Aave, even if it's currently being used as collateral. LEND and aLEND have equal voting power.
LEND token holders will be able to vote on this proposal, and if it's approved, the LEND tokens will migrate to the AAVE token at a rate of 100 LEND per 1 AAVE, and then AAVE token holders will be able to vote on governance updates.
You can find more info on the Aavenomics and token migration here:
Aavenomics: Aave Protocol Tokenomics
The moment we’ve all been waiting for is finally here, another milestone on the journey towards a more decentralized governance for the Aave Protocol. We are excited to introduce our tokenomics upgrade proposal: The Aavenomics.
The community will be able to create Aave Improvement Proposals (AIPs), which are the main tools for evolution of the protocol. The AIPs will then receive feedback. After this feedback, the AIP can be polished, and then if the community signals to implement the proposal, the proposal will be submitted to the governance.
Each vote has a duration in blocks and a deadline, and after the vote the AIP is either approved or rejected.
We're really excited for the decisional power to be in the hands of the community.
The role of the Aave team is now focused on getting the consensus of the community, expressing it as an AIP, turning the AIP into code, and then submitting the AIP for community vote.
Jordan: Aave V2 will improve the DeFi user experience, which in turn helps with mass adoption. Some of the features to expect are:
- Repay with collateral
- Debt tokenization and native credit delegation
- Fixed rate deposits- so lenders have predictable income regardless of market fluctuations
- Improved stable borrow rate
- Private markets (including RealT Market to bring mortgages on Ethereum!)
- Better aTokens
- Gas optimizations (this is currently a major hurdle for mass adoption, so Aave V2 will make gas txn costs much cheaper)
- Governance where the community has the decisional power with cool features like vote delegation
If you want to learn more about V2 and all these features in more detail, check out our blog post about it:
Aave V2: The Seamless Finance
After months of work, it’s time for Aave to leave phase 1 and announce a new version of the Aave Protocol. As expected, Aave V2 will continue to push the limits of what is possible with Decentralized Finance.
Gas optimizations are one way Aave V2 will help with the mass adoption of DeFi solutions, but also just improving the user experience in general and giving users more options when using DeFi.
I think we are still far from what we would call 'the mass' and still very early in DeFi.
Even if 1,5Bil TVL seems big, its nothing compared to the traditional financial system which is counted in trillions.
Plenty of time ahead of us, but this leaves more time to build even greater product. Eventually, Aave aims to be the financial infra for the traditional finance, a bit like they ended up all using computers instead of fax and typewriters.
They might eventually use DeFi instead of databases and private servers.
Jordan: Native Credit Delegation is a new feature, and the first one actually happened a few weeks ago (DeversiFi was the borrower).
All of the terms and conditions of the loan are laid out in a legal agreement using OpenLaw, so if the credit loan is not repaid, then there are legal consequences (whatever agreement was signed between the two parties).
Quick "explainer video" of how it goes down:
The base idea is that we built the infrastructure for two party to delegate credit to one another. Aave doesn't give out credit but enables trusted parties to lend out undercollaterized utilizing defi as a base layer for better capital efficiency.
Jordan: We see DeFi as being interoperable with traditional finance—not that one will eat the other.
The native Credit Delegation feature is one synergy between DeFi and the rest of the financial world, where Party A can deposit in Aave and delegate their credit line to Party B, who can use it to borrow without putting up any collateral (terms and conditions decided in legal agreement using OpenLaw).
The overarching goal here is to make DeFi a source of liquidity for traditional finance. For example, a Credit Delegator could be a DeFi fund looking for credit exposure, and a borrower could be a business, institution, government, etc.
There are a lot of synergies between DeFi, CeFi, and traditional finance, and it will be exciting to see how this plays out.
We are working closely with large financial institutions, it just takes more time for them to on-board. Fintech is still very new for them, so DeFi is years ahead. But what they want to see is trust and resilience built over years. Not everyone can build smart contracts secure enough to hold billions of assets
Banks don't like to take risk, they actually can't take risk because of the very nature of their business, so it's just a slow process, but we'll get there!
Jordan: I love this question. Yes, we are actively working to support NFT collateral. The space is very interesting, and Enjin is doing amazing work to push the NFT composability frontiers.
It’s only a matter of time once you can borrow against your NFT at scale.
Jordan: The main differences between Aave and other DeFi lending protocols in the space is that deposits in Aave are tokenized as “aTokens,” which earn interest every second and are pegged 1:1 to your deposit.
Aave has a focus on innovation and empowering developers with liquidation tools, Flash Loans (first uncollateralized loans in DeFi!), and more.
New features like native Credit Delegation are unique to Aave. Aave also has multiple markets with different uses and parameters.
We are particularly excited about the upcoming Aavenomics, because AAVE token holders can stake their AAVE for the safety of the Aave Protocol users in return for some staking incentives.
Also, Aave is very risk aware, and we have had multiple audits, formal verification, and take many security and risk measures.
Eventually, comparing difference is about taking 2 objects at a moment x in time and trying to differentiate them. For me, the biggest differentiation is the team of builders part of the Aave fam, and our community which push to continue to innovate non stop.
And this is a not a material difference that you can see in a side by side comparison, you have to appreciate it in the long run.
I'm just as part of the community as anyone else, and this is what we want to achieve with the path toward a more decentralized protocol, but seeing our community believing in the vision and what we wanted to achieve during 2018, 2019, when no-one was talking about DeFi really made me proud.
And more recently, as we published our governance forum, seeing the involvement of everyone and community members coming with their own ideas on how to make the protocol better is just amazing!
Flash loan is a technology specific to the Ethereum virtual machine.
It uses the finality of the Ethereum blockchain to make sure that if a transaction isn't repaid, then the whole transaction is cancelled like it never existed in the first place!
So it's truly novel—it means that people don't need capital for transaction such as debt swaps, collateral swaps, etc.
Its a unique building block, which really couldn't be possible outside of blockchain
There is no precise answer to this:
- It depends on what you are borrowing, each assets have different rate based on the supply and demand of those assets.
- If you are borrowing stablecoin, you can borrow at fixed rate at the moment of the borrow transaction.
A fixed rate can be rebalanced in case of extreme condition such as 100% utilisation of the lending pool
I recommend trying first on testnet to get familiar with how algorithmic lending works!
Aave comes from the Finnish word "Ghost." Stani, the founder, is actually Finnish.
I also think the ghost reminds us of the idea of transparency, which is a core part of the Ethereum ethos.
Dforce was a fork of compound version 1 and decided to support assets which could not technically be supported, this vulnerability was used to drain the whole liquidity of the protocol.
In the case of Aave, we try to be as diligent as possible, having multiple security audits and mathematical verification of the smart contracts.
On top of that, our upcoming tokenomics is built to take the risk of such an event happening and making the protocol whole again.
However, this is all new technology and like everything in blockchain, we should never feel safe. Anything can happen even with the best effort and best security in the world, we never know. We can just do our best to avoid this!
We'd like to extend a big thank you to Jordan for taking the time to join, and to everyone who participated by asking questions!
Until next time—see you in the chat room.
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