A Glimpse into the Future of DeFi
The Ukrainian resistance could popularize DeFi awareness
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In early 2022 DeFi is still a hot sector, not to the moon NFT hot, but attracting talent. The attraction of talent is the main indicator a space has a bright and viable future.
After months of teasing a possible Web 3 social media platform, DeFi giant Aave has bagged a major hire from one of the world’s most popular social networks. The lead data scientist for Twitter Spaces is joining Aave as the DeFi protocol ponders a social media play. This has caught my attention. While DAOs have been prone to hacking in recent years, DeFi could have a really good decade in the 2020s.
So what the heck are we talking about here?
After ruminating about Russian oligarchs, a criminal tyrant and the funding of the Ukrainian resistance via crypto, it has got many of us thinking. Decentralized finance, or 'DeFi', is an emerging digital financial infrastructure that theoretically eliminates the need for a central bank or government agency to approve financial transactions.
Aave in the Future of DeFi
Even in 2022 though what is less clear, however, is who will build the DeFi future? So what is Aave?
Former Twitter Spaces lead data scientist Julien Gaillard announced on Twitter that he was stepping away from the social media giant to become the data science lead for lending behemoth Aave.
Aave is a decentralized finance (DeFi) protocol that enables the borrowing and lending of cryptocurrency, including so-called flash loans. Flash loans are considered the first uncollateralized loan option in the DeFi space.
Aave is built on the Ethereum protocol and it’s considered one of the biggest DeFi platforms, and one of the top that focus on lending and borrowing cryptocurrency through a pooled liquidity system. Lenders can earn relatively low-risk, passive income from interest paid on loans, without having to engage with third-parties or middlemen.
Other popular DeFi platforms you may have heard of are Terra, Avalanche, Chainlink, Fantom and many others.
I don’t know about you, but I’d be happy to participate in the Twitter of Ethereum. Good riddance Jack Dorsey.
Could Aave become the Twitter of Ethereum
Aave is one of DeFi’s pre-eminent protocols, commanding $18.50 billion in total value locked as the fourth or fifth-largest project per DeFiLlama. In recent months, Aave founder Stani Kulechov has been teasing a possible social media offering, at one point going so far as to say that the protocol was pondering “Twitter on Ethereum.”
The Future of Decentralized Finance is Real
I like the DeFi space in theory. Think about it, first, there is no financial institution, no intermediary that oversees or grants loan requests based on creditworthiness. Instead, Aave is a “trustless” network that utilizes smart contracts to execute the loans, thus removing the middlemen.
Where a bank would grant a loan in dollars (or another fiat currency), Aave’s loans are in crypto. There are no widely accepted credit checks or scores in the DeFi space, thus users must post collateral in order to get a loan on Aave (or one of its competitors).
“It goes without saying that Web3 has the ability to empower users more than the social media created by big tech and this empowerment is attractive for many people working in Big Tech to join Web3,” said Kulechov (pictured above) in a statement to a crypto media outlet recently.
The thing about Aave is it has that vibe where it’s able to attract top talent in 2022. Other recent hires include Jessica Sit, a former Apple team lead, to head Aave’s marketing and content efforts, as well as Christina Beltramini, a former Tik Tok business development specialist as head of partnerships. Something is definately up!
The Aave Protocol, an open source and non-custodial liquidity protocol is starting to interest me, and I’m not the only one. We know that Square Inc. (now called Block) is building a new open-source platform for non-custodial Bitcoin services. The race to the one true DeFi platform is on as well as the “Twitter of Ethereum”.
Aave is a decentralized lending system that allows users to lend, borrow and earn interest on crypto assets, all without middlemen.
Aave is a for-profit company founded in 2017 by Stani Kulechov and based in Switzerland. Kulechov was trained in law in Helsinki and started Aave while still a student.
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What is a Flash Loan?
A flash loan is a unique feature on the Aave platform. These are uncollateralized products that are possible thanks to the way Ethereum works (Aave is built on the Ethereum blockchain network).
Flash loans are automated, rapidly executed loans that must be repaid within one Ethereum transaction. If the principal and interest are not repaid in that time, the loan is effectively reversed, the transaction removed from the blockchain as if it had never occurred.
Aave’s token is ranked #55 on Coinmarketcap.com.
Aave users do not need to trust a particular institution or person to manage their funds. They need only trust that its code will execute as written.
At its core, the Aave software enables the creation of lending pools that enable users to lend or borrow 17 different cryptocurrencies including ETH, BAT and MANA.
The firm, originally named ETHLend, raised $16.2 million in an initial coin offering (ICO) in 2017, during which time it sold 1 billion units of its AAVE cryptocurrency - originally named LEND.
A Stagflationary Environment will Make DeFi More Accessible
Bitcoin, the largest cryptocurrency (by market capitalization), rose in the shadow of the 2008 Global Financial Crisis. Now as the world in 2022 may be on the cusp of a stagflation crisis with rising energy prices and supply-chain breakdowns, DeFi might have a unique moment to take-off.
As programmers, data scientists and IT workers it might be an interesting time to work in the DeFi industry. Aave’s core DeFi business notched a recent win with the launch of an Aave Arc permission lending pool featuring 30 regulatory-compliant institutional users.
While most articles dealing with Aave deal with trading the token, I’m more interested in the future of the social media play here considering the recent hires. Aave launched in September of 2017 and was originally known as ETHlend. Five years later it’s attracting significant talent from BigTech, what does this suggest for the future of DeFi in the 2020s? I think it’s a very bullish signal.
During the Global Financial Crisis in 2008, our financial infrastructure failed. Governments bailed out the very institutions that let the economy down. This episode spurred a serious rethink of our financial system. Now with the Fed’s action in 2020 and stagflation risks and a likely stock market burst of the bubble, we’re entering a period of similar speculation.
In terms of stability, longevity, and commitment to innovation, the Aave platform continues to be one of the largest in the DeFi space. In addition to building a more decentralized Twitter, I think Aave can also introduce additional features, such as instant loans, and other forms of issuing debt and credit that take advantage of the unique design properties of blockchains.
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