Aave – the lending protocol for money market creation – has kickstarted their credit delegation feature with a $500k unsecured line of credit to DeversiFi.
Today marks a historic moment with the first Credit Delegation on Aave Protocol to @deversifi ??@OpenLawOfficial was used to conclude the loan agreement ??https://t.co/UUSm5Iwb3W
— Aave (@AaveAave) August 6, 2020
Foreshadowing the Aavenomics rollout, Aave showcased a suite of innovative new features including the Uniswap Money Market and Credit Delegation. Today, Aave partnered with DeversiFi to serve up $500k of USDC for the rising layer 2 DEX to use as liquidity.
Using OpenLaw, the two parties entered into an onchain agreement detailing the terms of the loan and the Credit Limit – in this case, 20 WBTC.
“Credit Delegation is an essential building block for undercollaterized lending at scale.” COO Jordan Lazaro Gustave told DeFi Rate. “Eventually it will enable fintech and institutional lenders to source their liquidity directly from DeFi. We could even see a day where Aave is the foundation for liquidity in legacy finance and I think that’s quite exciting to see!”
What’s to Know?
Using a Credit Delegation Proxy, Aave allowed DeversiFi to borrow against it’s $500k of USDC locked as interest-earning aUSDC. While this particular agreement was largely positioned as a spectacle for how Credit Delegation works, DeversiFi exercised its full credit limit of 20 WBTC, provable onchain. Here’s a good diagram of how it was broken down.
This first lending agreement between “Karen Lender” and “Chad Borrower” showcases the full potential for any two parties to enter into an unsecured lending agreement – one of the many innovative features Aave has rolled out in recent months.
For DeversiFi, the zk-Snarks Layer 2 exchange has been steadily gaining traction since it’s 2.0 upgrade in June. We expect that in order for high-frequency traders to make a full switch, liquidity will need to be deep enough to compete with centralized competitors. While 20 WBTC surely isn’t enough to turn any heads, it does open an interesting discussion of how DeFi composability can work to other’s advantages.
Outside of this first loan, Credit Delegation is available to anyone with Solidity know-how. For the less CLI-friendly, the fan-favorite yearn.finance rolled out yborrow.finance – a front-end interface to take advantage of credit delegation today through yVaults.
With the upcoming Aavenomics migration to AAVE, we’ll be keeping a close eye on the rising DeFi lending protocol in the coming weeks.
To stay up with Aave, follow them on Twitter or join the conversation on Discord.
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Cooper is the Editor of DeFi Rate and a contributor to leading DeFi outlets like the Defiant and Bankless. He is active in the DAO ecosystem through projects like MetaCartel and Raid Guild where he seeks to incubate governance models and grassroots community development. He is an ambassador of Set Protocol and the Director of Fitzner Blockchain Consulting where he authors a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.
