Aave has been one of the major players in DeFi in 2020 so it was impossible not to interview their CEO and founder Stani Kulechov to sum up the events of this year in the decentralized space, also to understand what 2021 will look like.
How is 2020 going?
2020 has been a crazy year for DeFi, and the total space has grown from just over $600M to over $15B in total value locked in assets at the time of writing this. We launched the Aave Protocol back in January, and already we surpassed $2B market size. It has been very exciting to see the space develop so much in just 1 year. Amazing projects have popped up on the map, and now we are moving towards mainstream adoption.
What are the plans for your 2021?
DeFi’s growth in 2021 will dwarf 2020. We just launched Aave V2, which introduces some cool upgrades to make the DeFi experience more seamless. Aave Limited, the branch of the company responsible for integrations, received an Electronic Money Authorization from the UK Financial Conduct Authority, meaning that Aave Limited can issue payment accounts and facilitate currency conversions. In 2021 we plan to keep innovating, and also to bridge the gap between the DeFi and FinTech spaces by making it easier than ever for new users to purchase crypto and onboard to DeFi.
Additionally, Aave governance is live so the community now has the power to create and vote on proposals. This is a huge step towards decentralisation, and now the development of the protocol is in the hands of the community, with the role of the Aave team as “builders”.
How is it going with your plan for the tokenization of Tesla?
Haha this was just a tweet– no official plans here, but if Elon Musk is reading this hit me up.
With the increasing number of lending and borrowing services, how will Aave try to differentiate its project?
Aave has been a pioneer in the DeFi ecosystem since 2017, so there are many factors that help maintain its cutting edge. The Aave Protocol only launched back in January, and it quickly grew to $1B TVL (record growth for the DeFi space) with no security incidents.
One unique tool that was introduced with Aave V2 is yield and collateral swap which lets users swap any of their deposited assets. This tool lets you swap to get the best yields on the market at any time, making it easier than ever to get the highest interest rates. It is also a lifesaver when it comes to avoiding getting a borrowing position liquidated.
For example, if you’re using ETH as collateral to take out a loan and the price of ETH starts to fall, you can simply swap it to another asset and avoid getting liquidated. This helps borrowers maintain the health of their loan positions.
Aave v1 brought Flash Loans to market as the first uncollateralized loan option in DeFi. Now Aave v2 introduces another tool called Credit Delegation where a depositor can delegate their credit line to someone else who can then borrow against it without needing to put up any collateral of their own.
All of the terms and conditions of the loan are sorted out in a legal agreement. Credit Delegation is one way to bring DeFi, CeFi, and TradFi together. For example, a depositor could be a DeFi fund looking for more credit exposure, and a borrower could be a business, institution, government, NGO, etc. This makes DeFi a source of liquidity for the rest of finance and is a huge step forward in our vision to bridge the gap between DeFi and FinTech.