Navigating the Role of Protocol Politicians in DeFi

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)
• • 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)
• • 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)
• • 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)
• • 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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