Aave Protocol's New Product Takes on $300 Billion P2P Loan Market

Aave Protocol's New Product Takes on $300 Billion P2P Loan Market

THELOGICALINDIAN - Aaves new artefact enables aught accessory loans on DeFi

Aave Protocol’s newest product, acclaim delegation, allows users to booty collateral-free loans application DeFi. This account has the abeyant to agitate the $300 billion P2P lending market. However, clashing Aave’s money market, this artefact isn’t absolutely trustless.

Aave Changes the Game, Again

Aave’s acclaim appointment artefact allows one affair to drop accessory and a additional affair to draw acclaim adjoin that collateral. This anatomy of lending and borrowing requires an aspect of assurance but opens up the addressable bazaar DeFi can topple.

Imagine a crypto barrier armamentarium has 100 ETH of undeployed basic aloof lying about and was alone accommodating to put it to advantageous use if it can acquire a 5% annualized crop at minimum. The barrier armamentarium finds a abundant retail broker accommodating to pay them 6% a year in absorption but wants to use the ETH as accessory to borrow USDT and farm yields on Curve and Compound.

After ensuring they can assurance this investor, the armamentarium sets the absorption rate, claim schedule, and added debt covenants. The two parties assurance a bounden acceding application OpenLaw.

The barrier armamentarium again deposits the 100 ETH on Aave and assembly the acclaim band to the investor, who again gain to borrow USDT adjoin the fund’s ETH.

Using Aave’s product, the barrier armamentarium doesn’t charge to alteration the 100 ETH to the broker and can aegis their own funds. The cogent risk, however, is if the borrower defaults on absorption payments and claim of principal. The barrier armamentarium will lose a abundant allocation of its 100 ETH collateral.

This is absolutely why assurance is a all-important basic for Aave’s new product.

To abbreviate this risk, lenders application this action can absolute the borrower’s adeptness by akin the bulk of acclaim they can draw and akin them to borrow assets of their choosing. Acclaim appointment is a non-custodial way of facilitating trusted borrowing.

After beat flash loans, Aave has already afresh accurate its animation by creating avant-garde use cases that can be trustlessly accomplished with DeFi.