Aave wants to take DeFi mainstream

Expanding to multiple blockchains and addressing risks are key parts of its V3 upgrade as its contracts swell to billions of dollars in value.

Aave founder and CEO Stani Kulechov

Founder and CEO Stani Kulechov sees other growth areas for Aave such as fixed-income products and collateralizing NFTs.

Photo: Aave

Aave, an early DeFi protocol, is expanding across a number of new blockchains as it looks to draw in more mainstream users and retool itself for a much larger market opportunity in crypto lending than its creators anticipated.

Backed by a Swiss company of the same name founded in 2017, Aave is an open-source protocol for borrowing and lending crypto. The challenge it faces is not uncommon in crypto: It was built to handle millions of dollars in value, but it now has $18 billion in total value locked or deposited. The new version of Aave’s liquidity protocol, V3, tries to address some of its shortcomings by lowering risk, improving scalability and making Aave a truly cross-chain protocol, Aave founder and CEO Stani Kulechov said.

”When we built the V2 protocol, we were thinking that maybe we'll have $200 million worth of value locked,” he said. “It has billions now. Now we're launching the V3 protocol. We're kind of expecting that some day this protocol could actually have hundreds of billions of value or even a trillion. So we have this kind of scalability in mind.”

Many DeFi protocols initially attracted crypto-native investors as speculators looking for high yields or trading gains in tokens, and have been hit by a big decline in token prices. But Kulechov believes DeFi is just getting started, with a move to broader, more mainstream use in the future.

“We think of these protocols as a new back-end for finance that will be used by everyone who is interacting with finance directly or indirectly — similar to the way we today interact with HTTP or IP protocols,” he said.

Aave has grown quickly, a result of its open system where anyone can contribute to code and build something better, he said. But that means that risk has also increased tremendously for these autonomous systems.

Risk mitigation features in the new version include supply caps, which limit how much of a certain asset can be supplied to Aave; borrowing caps, which limit how much of a certain asset can be borrowed out of Aave; and isolation of assets, which means you can only borrow the same asset as the one you supplied as collateral.

While Aave was on Ethereum, Avalanche and Polygon, with more than $1 billion deposited on each, now with V3 Aave will be live on seven different blockchains, including Fantom, Arbitrum, Optimism and Harmony. This is important as activity on the Ethereum chain moves to Layer 2 protocols or other Layer 1 chains to address speed and cost, and developers and users need to be able to work across multiple chains. Aave’s governance also enables people to vote across different chains.

Aave has built “very successful” DeFi technology for Ethereum, Avalanche and Polygon, said Bill Dishman, investment analyst at CoinFund. “Aave remains one of the most trusted places for borrowing and lending capital throughout DeFi.”

Aave recently launched Aave Arc, a service for large institutions to trade in DeFi only with specific approved parties. This is designed to reduce risk and assuage concerns for large investors. The effort is still new but over $30 million has been put into the service with participants such as SEBA Bank and Fireblocks handling custody, Kulechov said.

Kulechov sees other growth areas for Aave such as fixed-income products and collateralizing NFTs.

Aave, which has a decentralized governance system, collects about $50 million in revenue per year to its treasury through its various activities, which makes it self-sustainable, Kulechov said.


Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.


Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories