Aave to launch institutional DeFi platform Aave Arc within weeks
July 26, 2021, 11:58AM EDT
1 min read
DeFi lending platform Aave has rebranded its upcoming institutional DeFi platform from Aave Pro to Aave Arc, according to CEO Stani Kulechov.
The decision was made to represent its purpose as a gateway to bring institutions into the decentralized finance industry. And while the platform is likely to miss its initial estimated launch of July, the final date won't be far away. “We're talking about weeks from now,” Kulechov told The Block.
DeFi protocol Aave works by letting token holders deposit funds into liquidity pools. Other crypto users can borrow tokens from these pools (having put up collateral) and will pay the tokens back, with interest. This generates a yield for those who lend out tokens.
Aave Arc’s goal is to provide institutional investors who face stringent regulatory requirements with access to such DeFi protocols in a limited capacity. Arc will offer private pools of funds where only participants who pass know-your-customer procedures can enter, on both the lending and borrowing sides.
In terms of yields, the private pools may end up with different yields to the public pools, since participation is restricted. Kulechov argued, however, that participants with access to both the private and public pools could arbitrage the difference. This could help to ensure the private pools maintain similarly high interest rates.
“I think the larger vision of the Aave Arc market is to create a more comfortable risk appetite for institutions to participate in decentralized finance before, for example, having the risk appetite to participate towards the permissionless decentralized finance, which is the bigger vision offering,” said Kulechov.
Today the always-on demands of online markets have to be matched with the ability to access opportunities instantly and with no limits. Historically correspondent banks would move large sums of money for those needing to transfer funds while creating bottlenecks of unnecessary friction.
Ethereum had a breakout year in 2021. It’s native asset, ETH’s, market capitalization surpassed $500 billion for the first time. Its network facilitated upwards of $7 trillion value transfer. Non-fungible tokens (NFTs) emerged as another “killer application” that have put its technology on the global stage and caught the attention of the masses.