Stani Kulechov on Why Aave Is So Successful - Ep.212
Unchained
Navigating Aave's Path to Decentralization
This chapter explores Aave's journey towards decentralizing its governance, discussing the initial need for administrative control and the challenges faced as the user base expanded. It highlights the importance of community engagement in decision-making and addresses issues like transaction fees that impact voter participation.
Stani Kulechov, founder and CEO of Aave, comes onto the show to discuss the lending protocol and second-biggest DeFi project by total value locked. Here are some of the highlights:
- How Stani’s background studying law and his passion for fintech led him to the world of smart contracts (1:53)
- Why he decided to transition ETHLend to Aave, and how that eliminated the “meme” narrative (5:55)
- How Stani would explain Aave to a five-year-old, or your normie friend (9:04)
- What new features were released in Aave v2 (15:54)
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- reducing overall gas costs
- aTokens
- swapping collateral
- debt tokens
- What Aavenomics is and how the “safety module” attempts to keep the protocol secure (20:39)
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- How AAVE works as a governance token
- Active versus passive risk in governance staking
- How Aave is transitioning from a centralized to a decentralized protocol (25:01)
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- what he's finding difficult about this process
- issues with voting and an over-reliance on the Aave team
- delegating voting power to what he calls “protocol politicians” and whether this is good or bad for DeFi
- Who is using Aave and how they are using it? (37:27)
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- what OpenLaw is and how OpenLaw contracts work
- how credit delegation, or unsecured loans enforced by law, differ in v2 vs V1
- how people could use lending protocols to build credit
- What Aave plans to do with the E-Money (EMI) license it obtained in the UK (50:51)
- Since Aave was a pioneer in flash loans, which are responsible for the majority of DeFi attacks, whether Stani would do anything differently (53:12)
- Aave’s partnership with tokenized real estate project RealT and how Aave manages it given that, in the US, RealT tokens are securities and can only be sold to accredited investors (58:42)
- How Aave has been thinking about scaling given the high fees on Ethereum (1:03:57)
- Why building a moat in DeFi is impossible (1:07:16)
- What is next for Aave (1:11:40)
Thank you to our sponsors!
Crypto.com: https://crypto.com/
Episode links:
Stani Kulechov: https://twitter.com/StaniKulechov
Aave: https://aave.com
Aave stats: https://aavewatch.com
Protocols mentioned
- ETHLend: https://www.prnewswire.com/news-releases/ethlend-announces-launch-of-new-parent-company-aave-300713825.html
- Aavegotchi: https://www.coindesk.com/defi-game-aavegotchi-preps-for-jan-4-mainnet-launch-with-nft-auctions
- RealT: https://medium.com/aave/realt-market-coming-to-the-aave-protocol-da4499a1e965
- Yearn: https://yearn.finance/
- Uniswap: https://uniswap.org/
- Sushiswap: https://sushiswap.fi/
- Kyber: http://kyber.network/
- Balancer: https://balancer.finance/
- $LINK: https://chain.link/
Aavenomics
- Aave’s documentation: https://docs.aave.com/aavenomics/
- Safety Module: https://docs.aave.com/aavenomics/safety-module
- Summary: https://aave.com/aavenomics/
- More background: https://defirate.com/aavenomics-upgrade/
Decentralization concepts
- Handing off admin keys: https://decrypt.co/46544/aave-officially-hands-over-governance-keys-to-defi-community + https://medium.com/aave/aave-admin-key-handover-3e09e603d348
- OpenLaw: https://www.openlaw.io/
- Protocol Governance: https://www.theblockcrypto.com/linked/73336/defi-lending-aave-token + https://docs.aave.com/developers/protocol-governance/governance
Other topics
- Electronic Money Licence: https://www.theblockcrypto.com/post/75845/aave-uk-fca-emi-license-defi
- Unsecured Loans: https://www.theblockcrypto.com/post/70678/aave-launches-new-service-for-unsecured-peer-to-peer-loans-on-ethereum
- Flash Loans: https://www.theblockcrypto.com/genesis/93740/flash-loans-as-a-capital-boost-tool
Aave Version 2: https://medium.com/aave/the-aave-protocol-v2-f06f299cee04 + https://github.com/aave/protocol-v2/blob/master/aave-v2-whitepaper.pdf
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