📺 The Return of Aave | Stani Kulechov

hey bankless nation welcome to another episode of state of the nation where we do a deep dive on a hot topic the hot topic this week is ave v3 the return of ave super excited about this new ave version just launched we have the founder of ave on the episode today and we're going to talk with stani all about the launch of ave we're going to talk about some other things too david what uh what's on the agenda for today yeah ave has expanded its scope just beyond borrowing and lending so in addition to ave we're

going to talk a little bit about lens protocol we had a christina from from ave on to on our panel all about social the web3 social world uh which is something that is boiling under the scenes i think behind the behind the the front front page of web 3. social web 3 is a thing and ave the team at ave is kind of leading the charge so there's so much to unpack with ave v3 but there's also so much to unpack with uh lens protocol and of course donnie has been around since before you and i ryan and so i would just want to pick

the brain of an og d5 builder that's kind of seen at all what's he think about the world of crypto in 2022 we're going to get into all of these subjects yeah i've got a lot of questions for him particularly on that uh that last piece right to be able to pick his brain and talk about will will defy ever recover relative to eth what does he think about this new crop of um defy 2.0 builders this this new class these uh these young hooligans and are they shaking things up so a lot more to talk about guys uh before we get into the episode want to

tell you a bit more about zurion our friends at zurion they've got an announcement a special announcement i think we've been talking about this for the last couple of weeks they are releasing a multi-chain world here a lot more to explore on xerion zirion of course is a place where you could take your non-custodial wallet whether that's metamask whether that's your ledger you keep your private keys you plug it into this fantastic interface and then you could do things do things with your crypto money imagine that that's what d5 provides

and you could do things cross chain so if you look at this david i've got optimism here i've got avalanche i've got ethereum across multiple layer twos and also across alternative layer ones you can also bridge be a bridge or you can move from ethereum to polygon in just one click with xeron as well if you click this more button you can see save borrow other things you can do within the xerion interface man this is a way a bank should be right because this is a bankless user interface i think everyone

everything we were hoping would come true when stani started the ave protocol now coming true in d5 with interfaces and aggregators like xerion what else you want to say about this awesome tool david well this is going to be particular particularly relevant because this is a brand new feature in ave v3 we're going to talk about it's called portals because of av3 is not on the ethereum l1 exclusively it is all across so many different layer twos and other layer one chains uh and so not only is xerion bridging between all the

chains but so is ave itself so i think xeron's probably going to ultimately be an interface for the many many different versions of ave v3 that are deployed all across the crypto universe so this is a very timely topic to be talking about a multi-chain multi-layer 2 world yeah absolutely so all you got to do is grab your wallet your non-custodial wallet plug it into xerion you'll see a link in the invite to do that and get started track your assets uh david got to ask you the question i ask at the

outset of these conversations which is what is the state of the nation today ryan the state of the nation is upgrading this one was easy this week we are certainly upgrading in ave v3 this is the state of the nation of course not only is ave v3 upgrading from v2 to v3 but we are upgrading from a monolithic l1 world to a world of many many chains whether you believe the future is multi-layer 2 or multi-chain we are upgrading nonetheless and so ryan we are going to explore what does it mean to upgrade in the world of 2022 in crypto

so ryan we are upgrading this week that's a great topic guys i can't wait to talk to stani it's been over a year maybe more since we've had him on the podcast so can't wait to pick his brain a bit more we will be right back with stani but before we get to the conversation we want to thank the sponsors that made this episode possible so you've got some money but how are you going to use it you want to spend me shopping now bro when you know you should be saving you'll never buy a house at this rate but what if you could spend and save at

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guys we are back talking about the return of ave with none other than the founder of ave stani he is the founder and ceo of ave he's a builder in d5 before we called it d5 i'm pretty sure you remember the ethelen days david remember those days uh now he's expanding his horizons to the world of web 3 and social we're going to talk about ave v3 which was just released we're going to talk about web 3 social what that means we're also going to get his take on the state of d5

today because stani is an og d5 builder and he's going to lend us a lot of perspective stani been a long time since we've seen you on bankless man welcome back thank you so much it's good to do a comeback here thanks thanks ryan thanks david uh and um nice to meet all the dj's here too that's right you know what so um we called this episode the return of ave but the truth is ave never left you guys have been doing stuff uh for a very long time and shipping every step of the way that's uh you know

why why i think ave rose to prominence is because you have one of the the the shippiest teams in all of crypto and all of d5 but um before we get into kind of the meat of what you've shipped recently with ave v3 i'm just curious man so what have you been up to lately what's what's uh stani been doing lately how are you dividing your time these days yeah i guess uh well i would say that most of my time goes into uh into definitely into the building so i i try to

spend as much as time as possible uh in the product side and of course a bit on this strategy but recently all the time that i i have more left uh i'm trying to envision a bit more where uh and which direction the victory uh is going towards and of course uh in terms of the talent creation because the other team is is growing uh i think last time when i was um uh in bangklis uh we had 17 18 uh team members at ave and now we have

uh almost reaching 100 so we're scaling in that sense and i think the reason actually why we are shipping quite a lot of things is that we have an amazing team that is just dedicated on pushing these protocols and interesting uh uh interesting innovation out so it pretty much is a kind of like a uh team effort and and i i think like that's what i realized uh recently that you know if you if you want to go very far uh you really

need to do it in a team effort way so that has been uh my kind of a focus at the moment and finding new new things to to build of course stanley uh the ave team has always in my mind kind of stood out from the rest uh ryan said the shippiest which is definitely definitely an interesting and appropriate adjective i would say to describe the ave team and defy has certainly progressed as well since we've last talked and in order to kind of set the context for this conversation about the details of ave v3 i first want to

get your take on what defy what crypto what what web3 has really done in 2021 that might have informed some of the decision making on the ave team to build certain features into ave v3 so again kind of just like zooming out and getting your take uh we haven't talked since 201 crypto happened so how would you just zoom out and reflect on 2021 crypto and what it means for defy and how would you say that's impacted some of the decisions uh both behind the leadership and decision making at ave

and also how that's gone into some of the prioritizations of av-3 yeah definitely a lot i mean uh when we uh first we built the other version one so we were building a protocol that we imagined uh holding maybe uh 20 uh uh 30 million worth of value log in smart contracts very early days in 2019 uh ended up holding a few hundred million worth of uh assets and then with the version

version two we were planning that maybe we'll hold a few hundred million uh maybe up to billion and in the current state across all the networks is is pretty much uh securing roughly uh uh 14 billion worth of value in the smart contracts so essentially when we approach the uh version three uh up up upgrade of the the protocol and the code base we we took two big initiative one um what was very

important to us is the risk factor so we started to realize that the ecosystem has started to grow and not not only in the sense that we have very interesting uh money legos we have very good uh base uh line protocols uh from from lending from uh trading but also that the space has grown uh and spilled over into multiple networks uh and and there's a lot of user adoption here so we realized that these protocols are starting to scale and they have uh

uh protocol market fit and what's uh fascinating here is that um we understood that maybe actually these protocols will be used especially abe in a way that we use https or iprotocol when we browse the internet so they might be utilized by everyone who has access to finance uh directly or indirectly so we started to think like how we can actually put the risk factor in front of how we're balancing things

we always build in a way that we want to build resilient uh safe and secure protocols but you know it's people and talent where it's building so there's always uh risk that we need to mitigate and also there's governance that uh adds risk or uh reduces risk depending on what kind of assets or risk spinal readers are said so we try to uh build in a risk adverse way and second thing uh what was important for us is the capital efficiency so many of these uh protocols are layered in a way that

uh you know you might be using 1d5 protocol but under the hood there is another uh protocol that the funds are going and a third one and and there's a lot of layering and different kinds of governance levels as well so the the capital efficiency played quite a lot of role because we wanted to ensure that uh it's a competitive protocol that we're building and at the same time it's scalable in in terms of uh risk uh wise so and also something that's brand new

in the world of 2022 crypto um and also later into the second half of 2021 is the an explosion of many many chains including uh many layer two chains alternative layer one chains i know you were just at the avalanche summit i believe in barcelona spain i think yes yeah uh and there's just growing ecosystems spanning uh like kryptos are spreading its tentacles all across everywhere including alternative layer ones and ave v3 is actually being deployed on i believe six different evm compatible chains uh

polygons yeah polygon phantom avalanche uh a few others which ones am i missing uh uh arbitrary optimism harmony and of course the ethereum l1 and i think that i think that is a great place to start when it comes to ave v3 because one of the cool new features in ave v3 is something that you guys are calling portals can you walk us through portals and what is brand new with ave v3 when it comes to portals yeah definitely so portas is essentially a feature where we realize that um you

know there's a lot of transaction between one particular chain to another there's this bridging element so bridge essentially is a kind of like a community service that is provided by um a project community or uh which is usually a multi-signature wallet where you know it holds the transactioning and messaging between one network to another so for example when you want to uh access the the polygon network but you have your funds in layer one you have to get them some way into that other

network so essentially what happens is that you lock your funds in the domain network and then on the another network uh equal amount of funds uh maybe so uh can't speak anymore even like reduced by the fee uh um reduced by the fee basically that's the amount you get on the another network and essentially uh the the challenge with the bridges is that you know moving this liquidity is is very clunky at the moment uh it takes a bit well actually quite a lot of time and

and also it's not very capital efficient most of the assets are sleeping actually in those deposit contracts so with this portal feature we realized that you know uh actually landing protocols like are a very good place to store assets across different networks wherever those um uh those protocols are deployed so essentially um if if we store assets in protocols like ave it means that uh would be actually interesting if you can

move the assets with the accounting between one network to another in a way that's you have some sort of um trust component there and what we created is this uh portal so portal is a way to actually uh get whitelisted by the other governance and and you are able to actually uh mint and and burn a tokens um in a way where you have a credit line this and this credit line is just for the time that you actually set all the transactions so what happens uh

in in an example is that you uh you you basically uh burn eight tokens uh in one net one network let's say the main of the market and mint them in a polygon market or avalanche market and essentially this feature by itself when you do this transaction under the hood as a bridge or some other entity you're able to create services where you could actually uh deposit into the main ethereum network

and actually then borrow on polygon network and repay on on uh let's say layer two like arbitrary or optimistic uh optimism so it's it's it's a way to move funds very seamless way and also the risk is reduced to the uh caps of what those boards can do so even in the portal there's there's risk mitigation and also there's a lot of space for the community to build additional uh mitigation tools such as staking and and so forth

so just to clarify when you use a portal you're not actually moving the assets crosstrain you are like for example you're putting ether into the ave version on ethereum but then the portal allows you to mint uh new value on a different chain using that collateral in the main ethereum version of ave or does ave actually do move the capital for the actual assets from chain to chain so the capital doesn't need to be moved from change one chain to another so what happens is

that basically you you burn the balance uh in in one network and then you basically meet the balance in another network and and basically so you are using uh so-called a token so when you deposit into the protocol what happens is that you you get a tokens in return and what these ports are doing they just are accounting between different networks and this is how we move funds uh faster between the uh the networks itself

okay so you deposit ether into like the ethereum version of ave you are received an a a ether or an ave ether but then using a portal you can burn that ave ether and then have that ave ether be minted on like avalanche or phantom or a polygon is that how it works exactly exactly and then once to get your capital back if you so you always do you always have a deposit of ave of your ether in the ave version of the ethereum l1 or does that become kind of

owned by the protocol at the layer one and then you just have a claim on it later how does that work so it's pretty much built in a way where uh it's more about the the accounting so for example if you burn from one place you mean in another place so there's basically kind of like the the accounting balance changes between those different uh markets and then can you use that a token outside of the ave protocol so like once once you kind of do the burn on ethereum

your aether on ethereum and it's over to say polygon can i then use it in other places within the polygon network or is this sort of does it stay contained inside of ave somehow it's inside of the the bridging component so essentially but you could what you could do actually for the users in terms of for example functionality you can build uh for example on the user experience of course the the bin thing and and burning happens in the uh in the

um under the hood but basically you can for example uh you can deposit in one protocol and then you can withdraw from sorry in one network and then we draw in another network but what just happens in in between is that there's just balance minted burn which happens in the uh portal itself so it's kind of like a more of a accounting uh measure and and and basically uh creating unpacked uh tokens and then backing them uh later

that is fascinating i guess this is not quite like a bridge but what would you classify this as do you think other protocols will will develop this sort of kind of accounting mechanism to allow the quick transfer of value from from one chain to another i think so because you what you create here is is uh basically the speed so you can transfer value from one network to another one uh very quickly and efficiently but also you can then create

cross chain applications so just to give some example uh many of the features that we created let's say in other version one and two uh we received use cases that we didn't actually kind of like anticipated before so for example with with flash loans which was one of the last implementations that we had into the the protocol what we saw is that you know flash phones started to be used in terms of like arbitrage and and a bunch of other interesting um uh features so i think like this feature

particularly uh the bridging is is one of the use cases but i think the more interesting stuff will happen once once we have a new interesting application coming in and and developers building things so i could imagine you could do a lot of cross-chain activity they deposit in one uh network draw capital in another one and repay in some other network could be one example but there's plenty of use cases probably in the future for this what's fascinating

to me is because um there's sort of a question like a the investment thesis question that's popped up on our radar and i think the bankless communities radar which is okay we've got the birth of all of these different genes some alternative layer ones and also um layer twos right and so the question of will the existing d5 protocols and networks will they spread and kind of invade those chains and maintain market share in those chains or will there be a new set of players in a new set of winners

that are i guess geographic specific chain specific winners so not necessarily ave in a network like optimism but some optimism type of lending and borrowing protocol pops up and starts to like win market share against ave but with this portal feature it feels like what uh you're doing with with what ave is doing is it's building sort of a network effect that crosses chains right so like ave had a massive liquidity net lending and borrowing network effect on the ethereum

main chain now with this portal functionality it seems to like be building a network across all of these other chains and i'm wondering if you think that is one way that uh d5 protocols like ave will maintain their network effect as they spread from chain to chain i um i really think so i i think it's a one way to say that it's kind of like a competitive advantage in the sense kind of like that it creates a lot of uh bring sort of efficiency in how capital

flows but for example in the version 3 there is other features that are actually uh i would say brings interesting network effect for especially uh in high transactioning uh networks and with lower costs so for example we have the uh high efficiency mode uh and we call it also as uh e-mode which means that you could borrow one particular asset at very high collateral require borrowing power so for example you can

borrow 98 of your uh collateral and it applies to same category of assets so let's say that you have die as a collateral you can borrow 98 of that value in usdc and and then you can create different kinds of interesting transactions between stable points uh if you want to go long and short but also like uh it brings ability uh to do even uh effects trading on chain with with uh uh high leverage for

example if you have a euro stable coin or let's say pound stable coin and you can go with a very high uh leverage which is quite fascinating but there is other use cases for example where you might have for example um staked eat as a collateral and then you borrow let's say up to 95 percent uh eat and you restake it into the uh eat what i was taking get the steak plate again and and loop a bit so there's sort of kind of like a features and network effects that are

actually designed on networks where you have low transaction cost and you need uh speed and just the heat example is fascinating because uh in the other protocol there is one point three or so billion worth of uh staked uh eat as a collateral at the moment with relatively mediocre uh borrowing power so it just showcases like how much you could actually use and there's like even like a longer kind of like a idea here is that

you know uh if you can if you are able to leverage and and have this like liquid staking of eat uh and it might apply towards you let's say liquid avax and and so forth what happens is that landing markets uh like the other protocol might actually have the staking yield reduced by by uh let's say the cost of the liquid staking so you don't need to necessarily go and stake to eat 2.0 uh you could come to the other protocol and

you can deposit and withdraw and you know it the the cost difference will not be that uh high so that that might happen uh over like a longer period of time okay okay so we we just talked about uh portals and we just talked about e-mode a little bit and i i asked you that's you know the specific question if these are ways for avid to build a network effect across chains and you're indicating yes yes they are i guess i want to ask the zoom out question then too while we're here while we're talking about this because this is one of my burning

questions for you going to this conversation stani so we are now in a multi uh l1 world multi uh layer two world there's gonna be lots of different chains right so it's no longer the ethereum main chain since we we talked to you in 2020. um so how do you think this works right well we have geographic winners do you think right it's like you know rather than you to swap you have a pancake swap or something or like a trader joe in in avalanche or do you think some of the

big category winners that started on ethereum main chain will migrate to these other chains and just gobble up market share i want you to like put on your forecasting hat and tell me what you think will happen well we have local chain winners or we have will we have some major category winners that span many different chains and another way to ask this is there was a time where i think we thought that um defy would have a whole bunch of blue chip types of assets and blue chip protocols i think

this is probably a symptom of price right with the the d5 pulse index and some of these other blue chip categories where d5 assets have not risen as fast as uh alternative layer one assets and other assets and so people are questioning well maybe every chain will have its own category winner of d5 and so we can't there's no such thing as d5 blue chips anymore um what do you think about all of this do you think we'll have category winners or geographic winners yeah i mean definitely the landscape changed completely over the the the past

uh year or year and a half i mean i still remember when uh you know david ryan me including we were a bit more like uh ethereum uh maxis well i mean to certain extent and i mean being born and raised kind of like in it as well like it's it's very funny looking backwards and and being so naive and thinking like you can transaction in in a scale where we are today with with ethereum at this current state of course uh but like

i i i definitely believe that um what you can do with the new change is that like new networks you can build new communities right so you can take something that already exists somewhere you know you can basically you can fork that code base and create a new um new protocol in a new network and and maybe create a community around that but end of the day um i've seen few other forks and they haven't been super

efficient mainly because um you know what counts is the uh community so how much you can actually build a community around the the protocol that's that's the starting point the second is that how much you can actually innovate and what is your rate of innovation so rate of innovation is something uh very important to all communities because especially when we're innovating in a open environment where all code is public you know everyone

shares their ideas relatively publicly in governance forums like what to build next um what kind of topics do you work and and so forth so i would say that uh if the the community can keep up with the rate of innovation and who is able to constantly uh bring new things uh into the environment uh that's where like kind of like we see a lot of uh advancements and it's the job then of the community to actually embrace the technology support good