Q&A with Aave
We recently announced the launch of five new coins on the Wirex platform for customers living in the EEA and APAC*. One of the new coins is AAVE, so we reached out to Stani Kulechov, CEO and founder of Aave to get some more insight into how Aave is shaping the DeFi movement and what it could mean for the future of finance.
Want a bit more background into Aave and their mission? Check out their spotlight here.
Why should more people be excited about the concept of DeFi?
DeFi has gained enormous traction, growing from nearly $920 million in total value locked one year ago to over $71 billion. One aspect of DeFi that makes it so exciting to watch is the composability of projects and people.
Code in DeFi is open source and accessible to all, which means that developers can innovate at lightning speeds and the space is constantly evolving. People should be excited because DeFi is borderless—anybody can access these financial tools from anywhere, and the market is open 24/7.
Additionally, DeFi negates the barriers to entry of traditional finance, such as credit checks, which can prevent people from accessing financial services. Decentralisation means that the system does not revolve around a centralised entity or middleman, meaning that finance is not only more efficient but also that traditional gatekeepers are no longer part of the process.
How do you think DeFi is going to change over the next 5 years?
In the next 5 years, I’m expecting that traditional financial institutions will take notice of DeFi and incorporate aspects of decentralisation into their own processes. With companies adding cryptocurrencies like Bitcoin into their corporate treasury, DeFi, FinTech, and TradFi are rapidly converging.
DeFi has built a permissionless backend infrastructure that FinTech’s front-end finance can plug into. Additionally, DeFi is a useful way for TradFi institutions and hedge funds to earn more in today’s zero or negative interest rate climate.
How could DeFi benefit the everyday consumer?
DeFi gives the everyday user access to many financial tools and services. Essentially, you can choose what your finances should look like. DeFi applications like the Aave Protocol allow users to earn interest on their digital assets, as well as borrow for any number of reasons.
What makes AAVE different from other DeFi tokens?
The AAVE token is the governance token of the Aave Protocol, so AAVE holders can both create and vote on Aave Improvement Proposals (AIPs), binding and self-executing on-chain proposals to update or amend the protocol.
Additionally, AAVE holders can delegate their voting and proposition power to other community actors.
AAVE holders can also stake their AAVE in the protocol’s Safety Module and earn incentives in return for helping to protect the protocol. These incentives are currently set at 550 AAVE/day which is distributed among all the stakers. In the case of a shortfall event, up to 30% of the stake can be slashed to protect the funds in the protocol, so stakers are rewarded for taking this risk.
How is Aave building on the DeFi movement?
The Aave community is constantly innovating, creating proposals for protocol updates, and voting on these proposals. The Aave governance actually just passed a new community-led grants DAO to fund ideas submitted by the Aave community to empower community developers and builders creating anything that contributes to the DeFi ecosystem.
Where do you see Aave in the next 5 years?
Down the line we see Aave as a set of software development companies that will continue to develop and innovate new, decentralised protocols around financial systems and more.
*Subject to T&Cs