Aave 🛠 Building with Aave & GHO

foreign [Music] my name is Andrew also go by defy Spartan uh and today we're going to be giving a presentation about building with Ave and go and most specifically this this presentation is going to be a lot of focus on go because I've noticed that a lot of people have a lot of questions and a lot of interest on building on top of it which is great um so I want to open up with this question why are we actually using distributed Ledger why are we not just using these centralized products why are we actually focused on using these Innovative networks and Technologies and really what it boils down to is the formation of agreements specifically agreements with properties which are very useful uh number one open anyone is able to verify and make these agreements between each other neutral that the Agreements are made through code not through the discretion of one single entity or actor self-custodial where users are able to make agreements on their own behalf and then finally verifiable where if an agreement is made and these terms are set that anybody is able to check the terms of these agreements and make sure that they're actually executing as intended so with these agreements in mind let's look at what are the actual agreements that are happening with a stable coin so number one to token Peg to a certain unit of value and it has the ability to do two main things mint and redeem um so when we actually look at these agreements the things that you have to ask yourself when evaluating a stable coin how can it be minted how can it be redeemed and how does it maintain its Peg unit price so we're going to look in depth at exactly how the go stable coin fulfills these things and in the process see how it can be built with um so when we look at the overall stable coin landscape it's pretty interesting that almost 90 percent of the value in these stable coins the agreements that are happening through these stable coins are not actually occurring through code they're occurring through the centralized institutions who basically have the authority over these agreements and the entire principle of not just go but basically all decentralized stable coins is to in essence fulfill the agreements of the stable coin with the values of the ledgers that they're actually built on top of so what that means is that the stablecoin itself is open neutral self-custodial and verifiable uh so with that enters go so what is go in short it's a stable coin native to the Ave protocol and what this means is two things number one it's governed by the Ave Dao meaning that the decentralized entity Ave Dao has the authority to vote on different aspects of go and second is that the initial way that go is minted and redeemed is through what's called a facilitator and specifically this facilitator is the Abe protocol and we'll go into detail about what exactly that statement means um so the foundation of go is this facilitator model if you were to go on etherscan and look at the actual go token contract essentially what you would see is this model which I'm about to show on the screen which is that go is composed of these different buckets so a bucket is an address which has the ability to Mint go up to a certain threshold and there's really just two parameters that do this number one is the capacity how much is able to be minted and second is the level what is the current amount that is able to be minted um So currently today the two facilitators which have been approved by the Ave Dao are the Ave protocol facilitator which we're going to go in detail on and to flashment facilitator which sort of mimics the behavior of flash loans in the Ave protocol if you're familiar with that um but the idea of go is that it's a flexible facilitator model which means that in essence there can be any number of facilitators which have the ability to issue go either through code or different forms of agreements that the Dow agrees upon um so specifically The Abbey facilitator so how exactly is go minted or burned through this facilitator well it occurs through methods which are actually pretty accessible to most people minting occurs directly through the borrow function and burning the go token occurs through the repay or liquidation functions um and to show exactly how seamless these actions are let's actually take a look at a piece of solidity code so how do you actually mint go with the Ave facilitator so maybe some of you are familiar with kind of the core actions of the Ave protocol where you're able to supply collateral and then borrow tokens against this collateral and this is what the smart contract call looks like for a normal token uh in this case it's borrowing a certain amount of the token wrapped ether if you were to Mint go instead of borrowing wrapped ether it looks the exact same to the contract developer or to the integrator minting go occurs seamlessly through the actual Ave protocol and this is because the minting of go is actually occurring you know under the hood of the protocol so this is a seamless process but there actually are several key differences to go which actually provide some very interesting opportunities for Builders uh the first are rate mechanics um so this is kind of the model that every single other asset in the Abe protocol uses essentially this is the model of the rate which borrowers are paying to borrow that asset and it exists as a curve so essentially the protocol is performing this mathematical calculation every single time an action occurs where it says okay what is the total amount supplied what is the total amount borrowed and based on that ratio and then the parameters which are determined by the Dao that is what sets the interest rate for for an asset within the Ave protocol uh go Works a little bit differently because go is not an asset which is supplied by other users and then borrowed go as an asset which is minted directly by the protocol which means that it has a different rate mechanic and specifically the way that it works within Ave is that go has a fixed borrow rate and then there's a separate mechanism for a discount essentially the regular borrow rate and then you have a different borrower rate which is accessible uh based on the amount of staked Ave tokens which a wallet holds and then specifically the way that this is actually implemented is that Ave governance has control over these three specific parameters so through the on-chain Abe governance which is used for to govern the the exact same governance process which is used for the Abe protocol they have the ability to establish the fixed borrow rate for go the amount of go that is able to be borrowed at a discount based on the amount of staked Ave and then also the disk the actual actual discount that is being given so in this example the apy with the max discount is one point six percent and this is uh basically if you hold the maximum amount of State Ave that Ave governance has set this is the discount that is applied to the borrow rate um and definitely the easiest way to understand this if you want to you know dive deeper into this model is definitely just to experiment with it yourself so on go.ave.com this is the testnet website for go and on this website there's actually a calculator on the go Reserve page where you can input amounts of staked Ave and go and you can model out exactly what the effective interest rate is and the amount after a certain amount of time and this is really powerful because if you think back to the regular Ave interest rate model uh essentially you're depending your borrow rate is dependent on the actions of other users whereas with go as long as the parameters are fixed by Ave governance it provides a level of predictability which you just really don't have in a lot of other different types of assets within the Ave protocol or in defy in general and now we'll talk about something which is definitely a Hot Topic with forgo and that is the mechanisms of maintaining stability and really this kind of boils down into two separate categories um so the first category is collateralization how does the avedao actually enforce that go is collateralized or how does how does the avedao decide when an address is able to Mint or Bird Go um and this is really based on a very simple mechanism so I actually pasted the contract code directly here and that is that within the Ave protocol the price of go is fixed to one dollar and this does not mean that the market price of go is fixed to one dollar that's that's not the same thing what this is saying is that in order to borrow or repay or liquidate go the value of the other tokens inside of your wallet must correspond to this one US dollar and what this means is that it effectively go has a collateral floor where no matter what the market price of go is the Ave protocol says that in order to Mint go against your collateral it has to have a value greater than one USD and this is essentially the collateral side of stability the second is actually you know the price which you're actually minting and redeeming go and this is not really a set mechanism but there's a variety of ways that effectively the Dow can use to to maintain this this Peg and the first is interest rate management so the idea that in order to set a certain Target the Dow can either raise or lower interest rates in order to you know incentivize minting or Redemption uh the second is incentivizing liquidity or uh like the the strategy that the Dow most commonly uses is coordinating liquidity so basically uh providing on the governance Forum you know resources for people to know here are the uh the places where go liquidity currently exists and is able able to you know provide the most stable rate of exchange and lastly is a tag stability facilitator this has an asterisk because it is not currently live but there is an update on the governance Forum as of one week ago that the peg stability facilitator is an audit and basically what this is is a way to Mint and redeem uh go at a fixed exchange rate with other tokens and this is useful not only for maintaining the peg price of go uh but also for a lot of use cases which we'll touch on in a little bit so how do you actually what are the types of applications that you can build with go or incentivize to build with go uh the first one would be payment applications as we touched on earlier almost 90 percent of the current stablecoin market cap and thus you know payments utilization is occurring through these centralized stable coins and so really incentivizing not only the usage of go in payments but also teaching people about why go is useful for payment applications is definitely uh an area of building an opportunity second would be credit delegation so credit delegation is a feature of the Ave protocol which essentially allows one user to take collateral and Grant another user the ability to borrow against that collateral and this is useful for a lot of different use cases uh probably the two most common ones that come to mind are social applications where essentially one address is able to you know perform an action with another address that they trust a user that they already Trust on chain and then the second is doing this sort of in autonomous systems where essentially a user is delegating their credit to a Smart contract and then that smart contract decides you know when to borrow for the user and provides basically a way for users to get yield by using their unused borrowing power and this is something that has currently existed uh one of the first implementations was with a wired vault which essentially allowed the users to delegate their credit to this smart contract and then the smart contract was able to perform these actions and then kind of a shared feature between these two payments and credit delegation of things which go enables and also the Ave protocol enables are methods using signatures so the ability to abstract gas costs away from an end user is extremely powerful when it comes to especially onboarding new users uh you know if you're building a payment application you really don't want to have to teach users how to create a wallet and how to fund the wallet with eth and you know pay for these transaction gas costs and teach them all the nuances and so by using these signature methods uh permit is the ability to transfer tokens via signature about proofs uh transfer of tokens via signature and then second the approved delegation is how you grant a credit delegation allowance to another address with signature and both of these are ways that you can abstract kind of the the web 3 aspect uh or abstract or the gas cost aspect of web 3 from the end user and the last thing they'll mention is visualizations uh these are extremely powerful for two reasons because the Ave protocol and go as a subset of that are predictable and verifiable and what this means is that when you're when you're doing a transaction with go or when you have go inside of your wallet the things which are occurring to that position are actually written inside of code so as a user I am able to know exactly what is going to happen based off of the current Dow parameters and my current position and so building visualizations I think is a very untapped area within D5 and Ave and go specifically uh just informing users about exactly what's uh what is happening when they when they perform these actions so specifically within the eve Global New York hackathon we've kept the prices pretty open-ended uh and an effort to you know not streamline exactly what people are building it's very open-ended so feel free to innovate and you know allow lot of different things not just the things which are covered in this presentation fall under these categories of best uses of go and the best Ave protocol Integrations and the last thing that I'll leave you with is a link tree where you can find a ton of different resources about Ave and go and the two specific things which I'd like to highlight are the Ave address book uh a lot of times a lot of the pain points of integrating D5 protocols is making sure you have the right addresses especially if you're working on multiple networks and what this address book allows you to do is import addresses directly inside of your JavaScript or solidity code so instead of copying and pasting addresses you can import Ave V3 ethereum and have all the addresses right there inside of an object and then second is the Ave utilities SDK this SDK has two main functions the first one is to read data from the protocol so querying on chain and the second is it provides very useful methods for actually submitting transactions so instead of having to find abis find these contract methods this provides a very streamlined example for how to do that and lastly I'll mention for both of these you can actually refer to the open source of a code base it uses both of these and is also just a great reference for how to actually interact with the Abe protocol and yeah with that that is the end of the presentation okay