In Aave Founder Stani Kulechov’s ‘Grand Plan’, $11 Billion DeFi Lender Overtakes MakerDAO – DL News

• Aave’s founder explained to DL News how decentralization opens the doors to competition.
• Aave has transformed into a DeFi supermarket with a wallet, social media channel, and stablecoin.
• Managing the complexity of a new business structure poses challenges.

Aave Labs has built its brand over the past seven years by creating a no-frills lending platform.

It avoided complexity and weathered the 2022 bear market as a stable DeFi banking business.

Today, Stani Kulechov, the company’s Finnish co-founder, is transforming Aave into a DeFi supermarket.

It includes a stablecoin, called GHO; a crypto wallet called Family; and Lens Protocol, as well as a social media network that is in the process of raise $50 million investors.

Alongside Aave’s lending operations, these units are now housed under a new parent company called Avara, based in London.

These moves strengthen Aave’s rivalry with several DeFi companies.

“Obviously, the advantage of a decentralized system is that there are always open doors for competitors,” Kulechov said. DL News.

No other player looms larger than MakerDAO, the seven-year-old stablecoin issuer that has long been in lockstep with Aave. As Aave has added new companies, so has Maker.

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“Every person on the planet has social capital.”

— Stani Kulechov, Aave

In his attempt to grow, Kulechov trades a simple model for a more complex ecosystem.

Kulechov said DL News This won’t be a problem. By building a single purchasing platform, Avara will cater to the needs of both DeFi newcomers and seasoned cryptocurrency users.

“Every person on the planet, regardless of language, nation, geographical location, has social capital,” Kulechov said.

“If we can solve the problem of who owns what we own online, that will fundamentally unlock more value.”

So far, Kulechov and the Aave team have proven their ability to create value.

By charging fees to users to borrow, lend, liquidate loans and make deposits, Aave has recorded approximately $100 million in income over the past 30 days, according to data from Logical token.

Aave’s total locked value, or deposits, has more than doubled in the past 12 months, to $11 billionData from DefiLlama shows this. Aave, active on a dozen different blockchains, surpassed MakerDAO this year to become the third most valuable DeFi project.

Aave’s TVL over the past three years. Source: DeFi Llama.

Building a walled garden for Aave users may seem counterintuitive, but it makes sense, said Drew Osumi, co-founder of venture capital studio Number Group.

“If Avara has a social network, a wallet, lending, and a stablecoin, I feel like there’s a world out there where if someone is completely new to crypto, they could see this as an easy onboarding experience,” Osumi said. DL News.

“I feel like the big plan is to be a decentralized, permissionless Meta, where users are actually valued at market value.”

But why would the world need another social media platform?

“The main idea will probably not be to replace Twitter,” Kulechov said. “What will be interesting is to have an open shared network, which anyone can create, and which already has users.”

Lens Protocol allows developers to build Instagram-like apps and add cryptographic features to them.

It caters to NFT collectors by turning profile pictures and user IDs into non-fungible tokens. It also allows decentralized autonomous organizations, or DAOs, to propose and vote on key issues for their community directly on Lens.

DeFi Rivals

Aave and Maker have been the foundation of decentralized finance since the ICO era in 2017. Both have benefited from meteoric crypto rallies and both have suffered market crashes.

The two often collaborated even though they were in competition.

This duel reached its peak with competing stablecoins.

Maker issues DAI, DeFi’s oldest decentralized stablecoin. Aave has started issuing its own stablecoin, GHOin July 2023.

Stablecoins used throughout DeFi. Source: DeFi Llama.

Both stablecoins are pegged to the dollar and are over-collateralized by other cryptocurrencies. For example, to mint $1 of either stablecoin, you would need to invest more than $1 in another cryptocurrency such as Ethereum.

It’s a market expected According to Bernstein analysts, this figure is expected to reach $3 trillion over the next five years.

“Stablecoins represent the largest market opportunity in crypto,” said Lito Coen, head of growth at Socket Protocol, a cross-chain bridging protocol. “If you’re going to tackle another market after lending, stablecoins are the most logical expansion.”

Extreme volatility

With GHO, Aave is also showing competitiveness. Indeed, Maker launched its own lending protocol, Spark, in 2023.

“GHO makes a lot of sense, especially when one of the largest stablecoins is directly overcollateralized spear a competitor to Spark,” Coen said.

The battle lines became clearer in April when the Maker community offered to support $1 billion in DAI with a new untested stablecoin issued by Ethena, a platform on the Ethereum blockchain.

Called USDe, the asset supports its $1 ankle differently from GHO or DAI.

Rather than being over-collateralized, it is backed by staked Ethereum positions and short Ethereum positions on exchanges that make money if the price of Ethereum falls. This is an innovative system, but one that has not proven itself in conditions of extreme market volatility.

For Aave, the arrival of the Ethena market brought many risks. If USDe collapsed due to the market crash, there was concern that DAI would also lose its peg.

With over $130 million in direct investment (DAI) in Aave, this was a risk the Aave community could not bear.

In April, Marc Zeller, founder of a DeFi governance project called Aave Chan Initiative, propose eradicate all DAI markets on Aave.

Kuleshov agreed.

“The departure process should begin immediately in case of a favorable outcome,” Kulechov said. wrote in the Aave forum.

Kuleshov attributed the episode to risk management rather than direct competition.

“There has been a significant increase in the perception of DAI risk,” he said. DL News“If that risk increases, the best thing to do is to be as conservative as possible.”

Meanwhile, Kulechov’s Lens protocol faces competition from another crypto-based social media protocol called Farcaster.

Both offer many similar features, but Lens stores more activity (likes, follows, and posts) on the blockchain than Farcaster. Farcaster opts for speed and user experience.

Farcaster has a big lead so far, with almost 600,000 users compared to Lens’ 430000. It also recently closed a $150 million funding round at a $1 billion valuation, led by Paradigm and joined by Andreessen Horowitz, USV and other leading venture capitalists.

“It’s a completely different sector within crypto, much less proven.”

— Lito Coen, Socket

It remains to be seen, however, whether these two social networks will last.

“The most uncertain sector for me is Lens,” Socket’s Coen said. “It’s a completely different sector within cryptocurrency, which, in general, is much less proven.”

New fundraising

Kulechov hopes so too.

In June, DL News announced that it was launching a new fundraising round that would value Lens at $500 million.

“I’m a big fan of what Stani is doing with Avara,” Coen said. “I don’t think enough teams are thinking big and trying to grow horizontally.”

Despite all the new technologies and business models in DeFi, Kulechov’s initiatives show how old-school product development and new markets are essential to growth.

“We like to move from building infrastructure to thinking about what these businesses are and also what interfaces we can build,” Kulechov said.

Liam Kelly is a DeFi correspondent at DL NewsContact us at liam@dlnews.com.

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