Will Aave’s New Plan Change DeFi Forever? | Stani Kulechov Explains

The DeFi market is experiencing fluctuations, with Aave's total locked value aiming to grow significantly. Stani Kulechov, co-founder of Aave, discusses the "Aave Will Win" proposal, which seeks to redirect 100% of protocol revenue back to the Aave DAO and establish a foundation for the Aave brand. Concerns about Aave Labs' influence on governance have been raised, but Stani emphasizes the transparent nature of governance discussions and the community's role in decision-making.

Aave employs a liquid democracy model, allowing for vote delegation, and has established revenue streams for the Aave protocol through AIP-1. The proposal also debates value capture mechanisms, considering whether to maintain a dual system or focus solely on the Aave token. Stani addresses concerns about prioritizing Aave V4 over Aave V3, noting that Aave V4's architecture is designed for modular use cases beyond traditional lending and borrowing.

The departure of key contributors has raised questions, but Stani reassures that Aave's vision remains intact due to its diverse contributor base. Effective delegation within DAOs is crucial for enhancing execution speed, as slow decision-making can hinder innovation. Aave aims to grow its net deposits significantly, targeting revenues from 100 million to one billion, which requires overcoming internal political differences.

Aave is recognized as an asset-neutral protocol that necessitates continuous investment and innovation. The governance model has evolved to facilitate cross-chain governance, and there is an ongoing need to refine governance structures for efficiency. Aave is contemplating a shift towards a token-centric model, moving away from dual models that have historically created uncertainty.

The industry is leaning towards either a pure token-centric or equity model, with discussions around focusing on tokens for clearer value capture. Tokens provide continuous liquidity and better participation rights compared to traditional equity models. Recent regulatory developments have created a more certain environment for blockchain technology, presenting opportunities for tokens.

Community participation and governance are vital for AVE's growth, emphasizing the importance of "skin in the game." Aave's new plan, particularly with Aave V4, aims to revolutionize DeFi by transitioning to a hub and spoke model, enhancing liquidity and simplifying the creation of new pools. Aave V4 will expand lending use cases to include ERC-721 assets and tokenless options, facilitating borrowing against collateral held by qualified custodians.

Aave recognizes the need to increase the availability of new collateral, particularly as most remains off-chain. The initial focus will be on on-chain native collateral like Ethereum and Wrapped Bitcoin, with plans to incorporate tokenized Real World Assets (RWAs) over time. Aave's modular structure will support various hubs tailored for different risk profiles, including those for RWAs and environmentally friendly assets.

Concerns about risk management with illiquid assets as collateral highlight the importance of verifying RWAs and developing solutions for auditing. Aave aims to provide financing for assets typically neglected by banks, focusing on less liquid RWAs and evolving technologies. AI integration is also on the horizon to enhance development processes.

The Aave team is prioritizing product development and growth, particularly following the V4 launch, with ambitious goals for the year, including launching a full protocol and new products. Aave aims to double its market cap and attract new Total Value Locked (TVL), recognizing the challenges in expanding beyond the current DeFi landscape. The conversation concludes with optimism about Aave's ongoing progress.