A couple days ago PANews had the absolute pleasure of having a sit down conversation with Stani Kulechov of the high flying DeFi protocol Aave. For those of you who have been living in a cave for the past 2 months, Aave has spawned up to become the #1 DeFi protocol based on Total Value Locked (TVL) in their smart contracts. Currently over $1.6 billion in value locked up. This was no little feat and they have been grinding for the past year in building up their community and protocol. And there is no hiding from it in the past few weeks.
“We see very busy times, I’ve never been in such a hectic DeFi environment as we are in now,” says Stani. “So definitely it’s been quite busy”.
Aave, like the rest of the DeFi sphere, have combined the likes of decentralized blockchain and finance to create a more democratic way of bringing financial innovation to those who don’t wouldn’t have the wherewithal nor opportunity in the traditional realm.
The official description of Aave is that Aave is an Open Source and Non-Custodial protocol to earn interest on deposits and borrow assets. The more informal way of explaining this is that Aave is allows users to deposit and borrow crypto assets in a secure and fair manner. But the word crypto assets might evolve into stating digital assets as non-crypto related collateral could have the potential to be used soon on their platform. Or even zero collateral in the case of the new Credit Delegation program.
The Aave protocol was officially launched in January of this year, but as Stani explains in the conversation, this project was an evolution of an earlier project called ETHLend he was working on since 2017. You see, Stani was quite involved early on with the Ethereum community before the hype boom and before that he was already creating financial applications outside of the blockchain world. But as he states, more innovation needs to happen to not only mitigate the risks, but also to allow it easier for new users to come on board.
This is actually a reason why they applied and was approved for an EMI (Electronic Money Institution) by the FCA in Europe which would allow them to onboard users and convert their traditional fiat money to cryptocurrencies.
“…it has been a plan for a long time and I think it’s just one step to the future of how to expand the user base into a more wider reach,” Stani explaining the rational behind it. “In essence, the gateway is allowing users to convert from traditional currencies to stablecoins, for example, and then it’s up to the users inside to move around the different DeFi platforms. We are not competing with the centralized exchanges, but we just want people to have better access to finance.”
As TVL has become the bellwether for quantitative success in the DeFi space, Stani elaborates how ironically they are not try to lock value but rather unlock value through the accumulation of their aTokens and the interest earned on those after depositing their crypto of choice.
Flash loans, Credit Delegation, and Credit Default Swaps have all been made available to the markets. When PANews pose the question of why we need more complex derivative products, which on face value might seem innocuous, but can stir up trepidation when we are reminded about the housing bubble and financial crisis back in 2008, Stani has a more sanguine view on this matter.
“…housing doesn’t have a liquid market, but it could have if the housing market is tokenized and traded on 24/7 in places such as DeFi,” Stani firmly explains.
It is not the complex derivatives themselves, but rather the under collateralization and/or the lack of quality collateralization the system lacked a decade ago. That is a difference people find it hard to fathom. Blockchain isn’t trying to overhaul on what we see on the outside, but how we manage systems on the inside for better experience of the former.
PANews goes on to discuss other matters such as his recent tweet about tokenizing Elon Musk’s Tesla and tokenizing mortgages. All going back to the discussion of allowing more assets to be tokenized and collateralized in DeFi. Hinting at a time where we might be able to use personal tokens (tokenizing one’s time and skillsets) onto DeFi. Tokenizing bitcoin has been a major trend but Stani sees this could be a potential security issue for bitcoin down the line. But at the same time, he pushes for other blockchains to tokenize their own cryptos for the same benefits tokenized bitcoin is experiencing.
“I wouldn’t like the idea of tokenizing the whole amount of bitcoin, the security is very strong but it’s just the concern…I would actually like to see more of the altcoins be tokenized as well. This is my opinion but they (altcoins) are pretty useless…it’ll be pretty amazing to tokenize a part of those into DeFi” Stani states.
The conversation wraps up on a more lighter side discussing Stani’s involvement in helping smaller DeFi projects integrate with Aave such as Aavagotchis, which seems to be a spinoff between the widely popular Japanese digital pets called Tamagotchi and implementation with Aave. Aave has been working hard and also have had their share of fun. Their community has been nicknamed the term “Aavengers” and when asked about which real life Avenger would characterize him in the Aavenger community…well…you’ll have to watch the conversation yourself to find out more!