The AAVE Protocol - Ernesto Boado

I will jump a lot on the slides but okay yeah well the thing is that we are here for the other protocol No so what a first of all bit about me yeah I'm Ernesto am blocking engineer so I come from Spain I was just a software developer I like play football this kind of stuff from Spain and at some point like I suppose your case or whatever I discover Bitcoin and they were trying to disrupt the bank economy so I say yeah it's fine I'm also kind of revolutionary but not so interesting and that I discover if you if you came up and I say ok this is a bit more interesting because like programmable a bomb in that sense so if we want to disrupt it's better to make it build new stuff and change him from inside so basically I join I joined the company and and and I start to build inside it so basically a be a base inside the FICO system that is completely our field and we really we really believe in how under the FICO system was basically everything about calm possibility and building we do that we have our our the pieces that they we use from previously from the fly and and we hope that you guys will do the same and the rest of the people know so I suppose you know more or less what is the file at the face like the centralized non-custodial protocols and all the services around so it's more or less like the phone and the classical financial system in terms of functionality but with the complete control on the in practical terms is basically the financials over belonging fearing and not only me see this a bit told a diagram of what is considered more or less defy some of the products here are not anymore some of the new ones are not there but this is more more or less the picture know you have payments infrastructure wallets web so we can say that the other is in the in the credit and lending a lending square for example and there is there evylyn and usually people ask oh but I'll be you are the guys from Italy and yeah basically before Robbie we will the Atlin that is like a peer-to-peer a landing protocol borrowers and lenders but now it's a little bit different so a how we came in with a band which is the which is the the problem that I was trying to solve so a the first building block that we needed it was the decentralized and stable medium of exchange because that generates that people it wants to borrow money for example you can deposit money and have a stable earnings on top of that money and kind of die who was the the foundation piece like because it scaled everything in a decentralized way some other currencies so that is the the initial piece no another really important about that we took inspiration long and basically our model is is like that is the learning tonic initiation models so what what they mean is like they eat oaken singing in BC X or the C toka singing in compound and what it means is that you can just grab the normal tokens that you depositing a mean service and that new token has a growing exchange rate decreasing stress rate actually but what it means is that it gets value over time because you are because the protocol is getting is getting interest so you just that opens the the huge possibility that you yes depositing a landing in a landing pool and you get interest but possibly it is not like in PPP before in the center is not direct so the profit is a smaller but let's say the usual experiences in orders of magnitude above because there's the posit you just kind of forget and you just get the returns so those are the main things that we we use we get inspiration from and because they aboard the backbone economical it will be like them the stable coins and then the composability that is more the part of the talk us know so we say okay let's from there let's build something like like bcx or like compound but we we're gonna make it a bit better in our opinion so what you can do with with Abhi's like like I say you can deposit you can do we learn from those deposits you can borrow and everything in a really liquid you go there you deposit you get your a token that represents and the growing the growing a deposit and if you want to borrow go you there you put a collateral but the thing is that as most everybody in the in the co system we are we since the beginning thought okay the most important in a part of our protocol is actually having the people building on it because that is the way of how you get a network effect yes the problem can be quite quite big by itself but you will never scale above that with if you don't have the composability know so that is that's it more or less about dubbing I hope is clear it's just a money market for boards and about integration a more or less integration of protocols like ours is similar but of course open to the creativity of whatever anybody can comes with and there is different levels of complexity the the normal integration is like the kind of launching of chain integration but it's more user face you know so you you just create a kind of client wallet or with some smart console a base wallet and from there you just grab the functionalities all the of the protocol and you just offer a better interaction that the protocol itself application or in our case for example we we have right now we are running in : the concerts and we will have the release on main that soon like during this month and and we are running a both the protocol level like the smart contracts and we have a client application was like a mobile hanging in web but the idea is that we want people just to integrate in their own clients and and build more than a perfect so that will be the first in type of integration that is not the simplest but is the most straightforward and it's like Arjun conveys all say on that is what they do then the next level that is quite popular lately is like the derivative tokens on top of a of kind of the the interest accumulating tokens in our case is called a token so it will be like a die G die or divide it's more as mark on that grabber on top of the other gauntlet that allows you to do something seems like died you you assign the entry to somebody did I you pay the glass of operations in the blockchain with with the interest that you are in the token at set I suppose you are familiar with it and of course the in the and the next one is the and the last one kind right now is the ecosystem actors and the co system actors is may completely related of how it works when you build a system and you want it to be completely decentralized and based on economic incentive you need actors like for example keepers that liquidate fire the liquidation of positions or the liquidators and says dying our protocol for example is like people has the capital to liquidate so they put they kind of repay liquidated position and they get in the collateral with a discount so they can play with that if they have capital they have the tools to to liquidate and the collateral to another a to another currency is perfectly fine or for example that the fibers and finances that is more like in the in the derivative tokens I would say so those are the three typical examples of what are we seeing right now in the fight that people is building but you know this is likely for last month's so probably in two months more there will be like two more but the thing is okay yeah we have a Lanham protocol similar to do two vcx or two compound but what is different in Ivan what day you can do it for developer know the the feature that actually is getting more excitement is for sure what we call the flash load and the flash load the thing is that is it allows you it's about the use case because it allows you to borrow in under collateral as way so you don't have capital but you want a is under collaterals way but missing a want and such that is the point so it's kind of a bit tricky saying that is in under collateral is way but factual it is because doing the transaction you can do whatever you want with with that capital a we call flash loans because of that so I will spin a little bit more later but an extra nary will be like you want to make arbitrage trading in different day and the centralized has changes and you don't have any capital to do it but you see opportunities for you yes borrow for one block do make in the same transaction multiple trades in different the same prices changes you get some profit and the only condition is that you need to return before after before the transaction ends you need to return the same capital you borrow plus a profit for the pool and the rest is your profit so that is the main use case the stable rates for example in in other protocols like me CX or like actually fulcrum or or compound they they only have the variable rate because the the interest rate of of money market protocols the most purest ik and and how it needs to work in in the core for them because of the economic all these variable rate because it depending on supply and then demand there is been utilization of the porno bar we money possum money the Kalima of those creates interest so what we offer is another type of interest that we call a stable rate we don't call it fixed because it's not fix it but we call it the stable because it's based on a local stable points so what it means is that you have points of stability over time and you can borrow for example today are 3 percent and probabilistically you will not be a change of 3 percent you can be changed under certain condition of the protocol that will be if they if their mean rate of the of deposit in the same currency is higher that the rate you borrowed so for example if you borrow that 3 percent fixed but then the utilization rate of the pool changes and the earning rate is 4 or 5 that will generate a situation where you actually borrow money and you deposit and you get profit so at that point you will get 3 balance and you will get changed to another stable rate but during the previous time you will pay fixed and is quite useful because fix interest is important for institutions to calculate to accounting that kind of stuff and what we allow also is the rate swap that is mam consequence of the previous one so you can basically change at any point the the borrower can change at any point between stable and variable rate the variable rate is just B the algorithm great in depending on the usage those three are the the new stuff basically that we do me there without a protocol and of course the rest is just a money market so now we'll go a bit more in detail of what is available to do right now we have the github like I say anyway we have the concert running in : and indeed hub we have the the code of the remark concerts is not the final version but is the one running in : because we are with an out it in process on sweetie needs day out that we will actually open source everything and it will be fixed we will introduce also some governor's to upgrade some parts of the college and will stand from there but the main function for sure and will be the same and probably be interface it will not change so what I will go function by function mitosis is better so basically you can deposit no to deposit and the main contract of the of the system is what we call the landing pool in the user facing because it's the continent where almost every action the needs to be interact with so for example the deposit you you call the landing pool contract and indicate which is the the reserve the reservist is the token you want to deposit so you indicate the address of the of the reserve that is it token the man you want to deposit and the and we also have a unchain referral system that right now is not active but it will allow potentially through haven't to to catch a referral codes and to reward a reference I think that actually is quite new because usually those those kind of programs are not implemented in the smartphone well this doesn't affect the the state so much at the end we just stay we just store the reference but it allows a lot of starting at the centralized way so the deposit is this you need to make an approval actually to another contra de is the storage contract we called lemon pool core that is the one that makes the transfer from from the from the user that is the only requirement before calling this deposit then a the redeem is one of the functions that they actually you don't need to interact with bisland in pull content you need to interact dealing with a token they don't how it works in our architecture is that the reserve and we only have the landing pool poor for the data no and for us reserves or token are just registers of data there in order architect to rely for example compound for them they a token itself has all the logic of the landing and whirlwind of each currency in our case is not like that our logic is in course mark hundred that keeps the date and then a Maps everything there the funds and everything so a the redeem the deposit goes to the to the landing pool core and you receive in exchange the corresponding a token so to redeem actually unit will today a token and transfer that you call a redeem function this function and it has a transfer form of the token and it talks to the to the core to say okay return the fans a crew with the crew interest to the end to the people that did this this is the reason why actually the redeem needs to be calling they token because it's completely token functionality but they token is completely a year C 20 compatible only the only addition is is this function and so on and logic related with the change rate of with the underline to for example exchange rate a token and the normal token it starts at the beginning of the protocol with an arbitrary number actually we are going to put a 100 and then that that exchange rate as the protocol accrues interest paid by the borrowers will go down so they token will be more valuable they as the time goes on as and people Rapace so this is the redeem the borrow is completely simple like through the landing pool so the same you indicate we reserved you want to borrow from here the amount a indicate interest rate mode if you want to use variable or or stable that is just a you in reference and and the same they and their referral code for now the referral code is not important so you can be just as here on that's a some detail yes um in the cold in some parts we have the the fix terminology but we dint if I that it's not for us is perfect but in the sense that it's a good reference and we understand and for developers it's also understandable but is not exactly so when the documentation we use stable a the rep a is also a really simple function is through the landing pool so the same you indicate the reserve they in the dress they the amount you want to repay and then you can also you are allowed to repay on behalf of somebody else then you can actually find the use cases to do that even like tip people that actually repay their loans or even I imagine cases with three but if tokens building on top of that and it is real interest it's a really simple functionality but some of the protocols don't implement nothing liquidation this is for what I say about the actors they kind of fail keepers but it's more Liquidators because it's not the in the keeper modern usually they just say fire the the liquidation but the here you you need to deposit demand the currency here the the liquidation is over a particular position of a user so that user usually has different collaterals combined and in our in our protocol the each collateral has a different a liquidation threshold and big a liquidation parameters so is kind of granular in the sense that a more risky more risky collateral a currencies will have a higher threshold because that and and the liquidation point also aim will be in you will have more channel between the link day when the liquidation starts and we when in actually is completely liquidated because that way you have more flexibility to actually take the collateral and go to this change that discount if not a whisper experience sampling yet in Gatlin were previous product cases where even with important merging of discount like we have like 5% but we also were considering 10% and even with 10% with some tokens where it was not possible you get the collateral but if the prices going down that is usually the case you try to liquidate and you are not able to so yeah basically you need to do collateral by collateral of people to make the liquidation so it's a usual position I will liquidate this part of your collateral and because then you also allow the liquidators of certain cards is because some people has optimized system to liquidate for example die or to liquidate some other gun with the collateral the the reserve is then what they borrowed then the minimum phase change so is what you are going to transfer to covert in the liquidation and the purchase of now is then the amount the user is for them to refer to the usual position that the stipulated and also there is the possibility of received a token instead of receive the token instead of aim of getting the normal and everything the location depends on the scale factor that is basically a factor that means that when is in one is open to liquidation don't show is the borrower should bow about it always be below humming below 1 or anyone should be okay and the the most important and kind of new thing is the flash law and basically they like I explained before the flash long a function what allows is to at the beginning of the flash long function the funds are borrowed from the from the pool from whatever reserve in a new you indicate here and these funds are sent to the receiver that usually is not usually it should be a smart phone that he goes quick we are a wallet but it makes more sense mark on that who makes to do something with the with the funds actually it will not work and then the amount but how this works is this is transferred to that the receiver contract after the after the borrowing then the other simple concert dues does whatever is necessary to do or whatever is the profit a model and then at the end that will return so it's a really simple function that you borrow you send everything to the receiver contract and then you need to do have a require that the receivable companies to send you back the same plus a fee that is fixed for the for the for the depositor for the protocol and that's it and the rest is for the receiver concert or whatever that contract that so yeah how to implement this I'm going a bit more on the technicals because it's the the new thing is that we have this flash long receiver base there is a another contra note and you should inherit from there from this thing that basically implements basically implement Smith to slide a internal borrow and then stuff like that and and you put you have I execute but basically this condo has a execute operation a function should have this execute operation function and then you put the custom logic you do one there that's it at the end you only need to say if you inherit from there it gets back there and that's it and the flaw how you fire the flash long is however you want like the flash home function in the lending pool is you can just fire with that normal wallet or you can have a smart a system with a smart phone that fired the flash long the flash drone redirects to the to the receiver the receiver does whatever it wants and the fun something interesting is about the use cases this is a real use case for example in being a liquidator in compound but not having funds like you just use the fans of our protocol and there are really really big opportunities of liquidation in any landing protocol so you borrow for one block you aim the poet and you deposit that to cover the liquidation in compound you receive the collateral then you go for example together with the collateral you fired the swap because you want to recover the the currency you actually borrow from our pool and then you return a probably you trade in the middle with with the with that you swap and do return in the to the pool and that's it and the pool receives a fee that is is basically sharing the depositors I mean it actually a puts the earning rate up because a spiritual theoretically you can have a block by block all the blocks doing flash loans people doing flash loans and using the the resources to do operations generate profit and part of the profit even even if it is more is block by block to the proto so it can be quite effective for that and that's but there are of course usually a of endless use cases for the for the flash loan it's on you to think about yeah yeah yeah yeah yeah this one and just the reference to finish developer talks key is the github and this court and it's my telegram but I will be around Stanny and Jessica Alvarado just just contact me and I can help in whatever [Applause]