You guys seem to be trying to take on right down to the retail level and the infrastructure, and I'd love just to hear your thought process on it.

Yeah.

Aave is actually sort of like a chronological market position has been important since we started from building the infrastructure first and making it available to everyone.

And we believe that what Aave has built is a credit network, and it means that the more participants join the network, it increases the liquidity network effects for all the participants and, and previous integrations.

And that means that the debt of the liquidity increases, lowering the cost of capital for existing users and also the future network participants.

And at the same time, that means that it creates more opportunity for borrowing use cases.

And that is why we see Aave more as a infrastructure in the background and as a more of a network.

Um, we can talk about Aave V4 and additional collateral types, but I'd also like to hear just of, about like the long list of improvements that you've been making and how they fit into your longer term strategy as well.

The question is, will they do it on an Aave, or are they going to try to, you know, circumvent that and centralize it and control it?

I think what will happen is that obviously we already see the benefits of open protocols.

And what open protocols like Aave are able to do is that they, they're able to create wide networks.

Um, and Aave particularly is a credit network, meaning that when participants, um, join the network, whether by providing liquidity or drawing liquidity against a collateral, they're simply expanding the liquidity network effects.

That means that every single participant, uh, increases the, the depth of liquidity and the cost of capital and makes it more attractive for borrowers to utilize that capital.

So in other words, it makes sense to have a one big liquidity network that everyone can join, and by joining, they are getting the network effects of an existing network.

And ex- existing participants are getting the benefits of that network expanding.

This morning you had a long tweet thread, and I'll just let you break it down instead of reading it, but starts with, "Disappointed by the European Central Bank and European Banking Authority's response to the MiCA consultation." So what are your concerns right now with how MiCA is currently handling DeFi, and what are you trying to get changed?

So how do you build one protocol that serves all three of these types of audiences?

audiences?It's a really interesting, uh, and, and, and I think a key, key, uh, question.

The, the way we think about infrastructure is that infrastructure has to be neutral and applicable to all distribution channels.

Um, the way we believe is that, um, the more sort of nodes you have in a network, uh, especially, uh, when it comes to lending or borrowing, the more, uh, uh, benefits you have, uh, for each participant.

That means that, uh, you have, uh, lower cost of capital, you have better liquidat- uh, l-liquidity coordination, uh, lower coordination costs, um, means less, uh, fractionalization or segregation of liquidity, um, better terms for borrowers, better terms for, uh, lenders.

And, and that is a key component of why lending works really well or actually like, uh, i-its best form is, uh, a network, um, and network is an infras-infrastructure.

And then once you have this baseline network, uh, it's all about how you distribute, uh, the network to, uh, billions of users, uh, over time.

Um, what does that look like in terms of access for users? How can any day-to-day person get access to these types of products, whether via earning yield on them, uh, lending to them, et cetera, et cetera?

Give us the TLDR on Stable Vaults.

Yeah, definitely.

Stable Walls is a new product that Aave is releasing.

And effectively what we understood from DeFi's evolution, so decentralized finance basically started with very early primitives into a very proven resilient ecosystem.

Aave obviously is a great example of that, over 22 billion net deposits.

for DeFi to scale, we need to sort of integrate DeFi as the backbone financial infrastructure into the existing financial world, whether it's institutions, fintechs, or going directly to consumers.

Now, to do that in a more simple and efficient way, we launched a product called Stable Walls.

How does that work?

Stani, Stani, what, what resonates with you there?

Yeah, it, it's sort of, um, [clears throat] it's, I, I, I think for DeFi protocols, DeFi protocols are agnostic to, uh, uh, different assets and, and obvious use cases.

So a-assets will change.

Um, but it, it does point out what Mike basically said, is that it really removes the pro-productivity around, uh, ETH as an asset.

So if you don't have the yield component, um, you won't have that yield component in DeFi unless you go high up on the risk curve.

So this is the, the, basically the, the, the biggest argument that actually the authors of the proposal, uh, the proposal are making, uh, is that, you know, let's just, let's just cut the, cut the, uh, issuance.

Uh, we cap it, um, no more issuance, yield goes down, um, all the way to, to zero basically.

Stani, how would you react to that argument?

Can you get us up to speed on what you and the team have been working on in the past few months?

Yeah, so obviously Aave has been kind of the flagship sort of protocol on decentralized finance.

So Aave functions simply as a lending and borrowing protocol where you supply cryptographic assets, for example, stablecoins to earn and other users borrow them against collateral.

And what is interesting is that Aave so far has been quite successful with native crypto assets using, for example, AVAX, Bitcoin and ETH as collateral and borrowing against these assets.

We had a peak of 76 billion in net deposits last year with 30 billion in outstanding borrow volume.

And that is incredible because That's simply in the category of 40, 30 top downs in the US, for example.

And now we've been trying to think about what is the future for Aave? How does it look like? And it's a lot about using the infrastructure that we built, the protocol itself, that is successful with native crypto assets, and applying that to all asset bases that are coming on-chain.

Perhaps Stani can talk a little bit about that construct and give them props for figuring out how to evolve in the space and actually help the community get revenue.

So maybe to start off, what led you to develop v4, and what is it kind of building on that v3 didn't have?

Yeah, I think the context for every iteration of the Aave protocol has always been sort of the existing context of where the state of the DeFi is at that point.

So we built Aave as a lending protocol.

So the way Aave works is...

there are people who are new to the DeFi space or so, is that you deposit cryptographic assets, stable coins, or tokenized assets, and you can earn interest.

You can use them as a collateral, and then you can borrow as well.

So typically, users go to Aave to earn yield on stable coins.

How are you thinking about risk management and what is your approach maybe to a risk management perspective? Like V4 features new isolation capabilities and asset lending borrow rates and other things, right? So what is kind of maybe the mental model there and how is it building on the current state of maybe the risk in the space today?

So just give us the broad outlines of what you put in this Aave Will Win proposal.

Yeah, and I guess in some ways there is sort of like a bigger question about sustainability and growth.

I think that the sort of like upgrade from...

The Aave interface that basically is run by Aave Labs and developed by our team, we used to have sort of a power swap integration that, based on that integration, created a positive slippage in some cases that was effectively donated to the DAO.

Mainly to regulatory concerns because we couldn't capture any fees over the past years, which kind of like became a sort of ongoing, very small revenue stream.

And we upgraded that into a call swap to get a better aggregation and efficiency for the users.

And part of this ability to give positive slippage basically wasn't anymore created for this integration.

So, you know, talk with me about why it is that you decided to go that route and, you know, whether you have any nerves about, you know, whether that could work out maybe not so well for you.

But That's missing the kind of broader context here is I think the genius act has now passed and that should be a real reset moment, Stoney.

Yeah.

I mean, Genius Act definitely started a whole new chapter in stablecoins.

And especially, obviously, stablecoins weren't illegal.

It was just unclear what they were in the US, as an example.

And I think the regulatory environment really sets the course quite a lot.

So why do we, for example, see a lot of innovation in AI and a lot of these other industries that there's a very little like a headwind and there's a lot of tailwind.

Do they have a shot domestically? What's your read on this and where it fits overall?

What was the reasoning behind that? And what were the conversations like with those institutions or those call it, you know, people who are more mainstream, as we're calling the panel, what did they need to be able to get into your product and DeFi products generally?

Yeah, I think the concept of institution is really wide spectrum, right? So there's already institutions in and using the permissionless DeFi US NASDAQ listed companies that are somewhere involved in crypto that might be for some Galaxy or similar type of market makers.

And I think what is interesting, at least for me, is that I see there's like a few different concepts of Fisher Finance.

And one of that is, for example, DeFi.

And DeFi is an environment where we're going to have the best financial opportunities regardless of the backgrounds of the user bases.

And obviously, a lot of finance is driven by institutions.

So that's going to be an environment for institutional usage.

I don't feel it.

What's been the architecture of the product from the beginning to now?

It's interesting because the architecture of our product from the early days as of what is it today and what we are building for the future has changed.

changed to quite some extent.

So we started first on more of a peer-to-peer model.

So I come from a background where I've built fintech applications before and I saw the rise of peer-to-peer lending and crowdfunding and this whole kind of like a financial marketplace economy.

And for me, from that perspective, it was very interesting to build a peer-to-peer model by using these smart contracts that just remove the middleman function where the smart contract can actually guarantee the behavior that the users are subscribing to.

And back in those days, the... novelty of of ethereum and all these assets was most of these assets they really didn't have a significant market capitalization there wasn't a concept of a stable coin so for example in ethereum which is the the the biggest blockchain and secures most of the value there wasn't even a way to transact a stable value.

Can you talk about in the beginning how you attracted assets and what you think brought assets in? And then we'll contrast that with today afterwards.

Why are you doing this? Why do you care about this?

Yeah, I think it's very interesting.

I mean, as a technology, I do think that blockchain is really fascinating because it can create different types of guarantees for the people.

And what we say at Awara is that we want to create the people-powered internet.

And what that means is that by using this type of technology, we're able to give guarantees for users.

So how you could access to same financial opportunities across the world without, let's say, middlemen.

How do you get the same transparency and you don't have information asymmetry, how you can make the same decision with the same knowledge, with the same optionality that anyone else around the world.

Why? Why are you not just taking this on your own platform, A, and then, B, anything that you're really excited about in the RWA space for your organization?

So how is it growing? Who's using it? And how do you see, I guess, that in the future as we see this institutional adoption of crypto? How do we get them into DeFi?

Yeah, it's really interesting when you think about the whole user base of the protocol.

Because the way that the protocol works, it's an on-chain application, essentially transparent.

Everyone can actually see what's happening there.

It's end-to-end auditable.

But what we don't really see is exactly who are the actors behind these transactions, which is...

Good for privacy.

Do you find people going to them or do they come to Aave for that as well? And what's the sort of interplay between the platforms?