Why Aave V4 Is Built Like a Central Bank for DeFi | Stani Kulechov
episode
Talking Tokens: Crypto, Onchain Finance, Investing
26 min
2 speakers
8 chapters
transcribed 1 month ago
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What motivated Aave to transition from a monolithic V3 to the hub‑and‑spoke V4 architecture?
In the past twelve months I I don't think I have met a bank that doesn't have a digital asset team and are thinking already uh all the way to DeFi and banks and asset managers are actually thinking of of of building products and what to launch.
I have the pleasure of sitting here today with Stani Kulikov, the founder and CEO of Ave Lab. Stanny, how are you?
Really good. Really nice venue and uh great to be here.
Yeah, you just came off from a round table, right? What were you discussing over there?
Stable coins, uh regulation, uh liquidity, you know, all the things I love.
I've heard of these things, yeah. Maybe let's start at a high level with some context on Ave V3 versus Ave V4. So Ave V3 is operating at scale that mirrors, you know, maybe a top 50 US commercial bank. I don't know if you would agree with that, but it has peak net deposits of about seven seventy-five billion dollars and has secured over a trillion dollars in cumulative deposits. And then Ave V4. introduces a completely new hubbin bespoke model, I believe is what you guys are calling it, with unified liquidity, risk isolation, asset level pricing, and more. 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 uh every iteration of the uh Aave protocol has always been um sort of the existing um context of uh where the state of the DeFi is at that point. So uh we we built Aave as a as a uh lending protocol. So the the way our Aave works if um uh there are people who are new to the DeFi space or uh or so is that you Deposit um cryptographic assets, stable coins, eat uh or tokenized assets, um, and you can earn um interest, you can use them as a collateral, and then you can borrow as well. So uh typically users go to Ave to earn yield on stable coins. That is sort of like the uh the biggest use case, and and uh I would say 70% of the users that are using Aave are using for yield.
and then rest are actually the uh the the borrowers that that create the interest rate that then goes to the uh the depositors. So um obviously DeFi has uh grown significantly over the years. So uh when we started back in 2017, um you know the space was really, really small, even if we had less users than the uh this room today.
How does Aave V4’s risk‑management model differ from previous versions and protect against market crashes?
uh at that point and it was very experimental uh but the vision was big and uh with Ave um Ave had multiple uh generations so in twenty twenty we launched the first version and a year later we follow up with another uh Ave V two and V three sort of was our kind of like a state of the art uh uh protocol and uh focused mainly on uh capital efficiency, uh just building a a a really good On-chain lending infrastructure that could be used with digital assets. And RV4 was a a creation of this vision that in the future we might have a very diverse set of lending activities on chain directly. And that might involve native crypto assets, Bitcoin and Ethereum, but it also might involve More tokenized assets or um might involve um sort of uh lending without any sort of tokenization, lending to the real world effectively.
So we wanted to build something that is uh extremely modular, has um uh good risk controls, but it allows to extend the protocol into any use cases in the future. That means that if we will have a new use case in the future, we don't need A new version of uh Aave because we can actually extend the protocol with this hub and spoke architecture, and uh spoke effect spokes are effectively lending markets and hubs are where the liquidity is stored. So the the idea here is that uh it is sort of like a lending protocol that can be extended to any use cases for institutions, uh fintechs um and and more of these. traditional use cases beyond what we're doing today with uh with in in DeFi.
How are you thinking about risk management and what is your approach maybe to a risk management perspective? Like V four features new isolation c capabilities and asset lending, borrow rates and other things, right? So what is kind of maybe the mental model there um and how is it building on the current state of maybe uh the risk in the space today?
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Chapters
8 chapters
1
What motivated Aave to transition from a monolithic V3 to the hub‑and‑spoke V4 architecture?
0:00–2:39
2
How does Aave V4’s risk‑management model differ from previous versions and protect against market crashes?
2:39–6:29
3
In what ways does the hub‑and‑spoke design give Aave V4 central‑bank‑like liquidity allocation?
6:29–9:10
4
How can corporate treasuries and large LPs use Aave V4 to manage idle cash and earn yield?
9:10–13:26
5
What is Aave Horizon and how does it enable tokenized assets to be used as collateral?
13:26–16:43
6
Why are tokenized equities and sovereign debt attractive for DeFi lending on Aave?
16:43–20:13
7
How is Aave building network resilience and ensuring stability during crises like FTX?
20:13–23:14
8
What is the long‑term vision for Aave as embedded infrastructure for finance and AI‑driven growth?
23:14–26:22
Speakers
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