Company overview

Aave is an open source and non-custodial liquidity protocol that is community-governed and does not involve a centralised institution or financial intermediary. Users can deposit cryptocurrency assets to a liquidity pool and start earning interest on them while they are loaned out to borrowers. Interest rates for depositors are adjusted based on the liquidity supply and borrowing demand. Because there are no middlemen, rates for depositors have historically been higher than in a traditional savings account. This has made DeFi lending protocols such as Aave an attractive way for people to maximize their passive income, as depositors accrue interest every second.

Users can also borrow cryptocurrency assets from the Aave Protocol, as long as they put up enough collateral in another asset. Loans are overcollateralized to ensure the safety of the depositors’ funds in the protocol.

Thought leader: Stani Kulechov, Co-Founder & CEO

Email: wecare@aave.com

Stani Kulechov is the Founder and CEO of Aave, an open source and non-custodial liquidity market protocol to earn interest on deposits and borrow assets. Stani was studying law at the University of Helsinki when he was first learned about Ethereum and he started exploring how it could impact the traditional financial system. In 2017, Stani released ETHLend, one of the first DeFi applications ever. Since then, he has made it his mission to create tools for an open, transparent, and equitable financial ecosystem through the Aave Protocol.

How is DLT and Blockchain reshaping wealth and asset management? Where is the industry today and how do you foresee things changing in the future?

Decentralised Finance (‘DeFi’ for short) refers to financial ‘protocols’ or distributed applications that are built on a public blockchain, are community governed, and are not controlled by a centralised entity. One way to think about decentralised finance is in terms of open source Lego blocks or components that can be assembled into financial services. We are building transparent and efficient internet based financial infrastructure of the future which will be composed and embedded into asset management services that are embedded in mobile apps, custody and wallet solutions. Through transparency and efficiency, our solutions will improve consumer access to financial services, enhance financial inclusion, unlock capital, catalyse overall economic growth and deliver alpha to active portfolios.

Today’s financial markets are fraught with opacity, siloes, fragmented liquidity and systemic risk. Historically, the focus of the industry has been on distribution of services through better analytics and mobile apps but the underlying manufacturing and production of financial services remains inefficient and opaque. The decentralised finance ecosystem is unlocking liquidity and enabling users to deploy capital to much more efficient uses.

What solution(s) does your company offer that wealth management firms should consider?

The Aave platform enables users to earn historically higher yields on their crypto and stable-coin (digital assets that are pegged to the value of a stable asset, such as the US dollar) deposits, which is particularly valuable in today’s low or negative interest environment where asset managers and corporate treasuries need to deploy a large amount of cash without taking excessive risk in equities or emerging markets.

Aave users can also post collateral and borrow cryptoassets against crypto collateral, or obtain a credit line from the protocol and use this credit line to lend on an uncollateralised basis. If the value of your collateral falls or the value of your borrowed asset increases significantly, your collateral can be liquidated to ensure the safety of depositors’ funds in the liquidity pool. The yield on dollar-pegged stablecoins has tended to be higher as there is heightened borrowing demand for these assets.

This high borrowing demand is due to the stable nature of these assets, as more volatile currencies mean that you have to more closely monitor your loan position to prevent a liquidiation event. Aave has been one of the fastest growing DeFi protocols globally and has attracted considerable attention from crypto natives as well as mainstream financial institutions looking at how DeFi can revolutionise financial infrastructure. As it becomes easier for asset managers to acquire digital assets and onboard to the world of DeFi, DeFi’s backend technology is merging with front-end fintech applications to create a more flexible financial system that end-consumers and institutions can use and benefit from.

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