The Solution to Transforming the Crypto Lending

2019-02-23 03:18:45 · 4520 views · 5 min read

Aave recently added a new feature to its crypto lending marketplace ETHLend. As one of the early adopters of Ethereum protocol, Aave is now able to provide a bridge between Ethereum and Bitcoin protocols. Through ETHLend, users can now use Bitcoin holdings as collateral to borrow funds when they want to avoid selling their holdings in the hope of upside of the crypto market.


We were very fortunate to have the chance to interview Stani Kulechov, the founder and CEO of Aave. During the interview, we discussed what Aave brings to users and DeFi industry, as well as tips for startups fundraising and leadership. Without further ado here is the interview—enjoy!


Part I: You, Product, and Crypto Lending

Tell us about yourself and the projects you have worked on before Aave?

I am just a normal guy from Finland who loves to create smart contracts-based technology. Before launching Aave and its main product ETHLend, I was working in various law firms back in Helsinki, Finland. You see, I am not a developer even though I worked on development for a couple of years before entering into a law school. I guess I always have been drawn to technology and enjoyed working in tech.


How the idea of Aave was born?

When I found Ethereum and understood the power behind smart contracts, it was mind blowing experience for me. Suddenly I had various ideas about how finance could be improved by decentralization. During 2016, cryptocurrencies and tokens were evolving into an asset class. I figured that why not use these assets to as collateral for loans, something that was a common way for banks to grant credit for shareholders. We first created a simple product and launched it to the main Ethereum network and people started to use it and ask more features. Of course, we started to evolve the project to a full-blown product now called ETHLend.


How ETHLend works? What is the narrative of the peer-to-peer lending experience you're talking about?

ETHLend enables users to borrow funds against their cryptocurrencies to avoid selling cryptocurrencies at a loss when the users need funds for expenses or any kind of finance goal. ETHLend is a peer-to-peer marketplace, where borrowers can place loan requests or takes a ready-made loan offer placed by the lender. The process to borrow is quite simple. The borrower simply transfers the collateral cryptocurrency and receives the funds for spending.


How does using of blockchain provide a competitive advantage for both P2P lending space and your company?

First and foremost, blockchain provides security. Since we are using smart contracts, the users of ETHLend do not need to trust us or the counterparty. Hence, we eliminate the counterparty and platform default risk in one single shot. How cool is that?


At Aave, we believe that the security we provide does provide a competitive advantage if the user experience is not compromised. Currently, we are providing one of the most straightforward user interfaces in the decentralized finance and hence we are directly competing against the centralized service providers. People actually tend to choose us because we are decentralized.

What does Aave as a non-custodial protocol bring to the table in the crypto lending market (compare to other token-based platforms and etc.)?

Aave brings control to the user. Instead of holding the private keys, we are in the belief that the user should have all the control over their funds. Additionally, we believe that trustless and permissionless technology wins the long-game when it comes to crypto lending since there is less point of failures in our model compared to the custodial models.


Why do you choose to launch Bitcoin lending right after ETH lending feature? Can Bitcoin lending be done in a trustless way on Aave/ETHLend?

Our solution is a state-of-art interoperability solution to bring real Bitcoin to the Ethereum blockchain. We have an oracle network that transfers information from Bitcoin network to the ETHLend Ethereum Smart Contracts. Even our Bitcoin deposit boxes for the collaterals are multi-signature addresses where the borrower, lender and we hold a separate key.


We know that most of the cryptocurrency holders are in Bitcoin, which is considered as a gateway to cryptocurrencies. Would be unfair to not be able to onboard these cryptocurrency holders to our marketplace. That is why we wanted to integrate Bitcoin and soon other popular cryptocurrencies.


Part II: Startup, Users, and Business at Large

What have been the biggest challenges in building Aave and getting it off the ground? Any lessons or tips you’d like to share with fellow blockchain entrepreneurs?

I think building Smart Contract-based technology is a true endurance test. It takes much more time to develop decentralized finance, yet it’s still worth it. I would recommend everyone to think of their main aim and focus on that. Also, work together. There is no competition in blockchain, there is only cooperation. If we want to get mainstream adoption, we need to work together. That is the only way.


You did ICO back in 2017. The “ICO model” in blockchain space for a long time was “the only way” to raise the funding. It’s obviously not quite the case anymore. So what’s the alternative and what do you think blockchain startups should be doing right now to get the funding?

There are of course still opportunities in ICO models, or the novel STO model. For decentralized finance (DeFi) projects I would rather though recommend pitching your project to DeFi-focused VC’s. Of course, you will need to take into mind that VC’s are looking for a return and that is something to consider whether it’s in line with your values.


One of the biggest issues for dapps is user acquisition. What solutions have you found to try to resolve this problem? And which one you’re currently focusing on to get your initial core users, lenders, borrowers, or both?

Making things easier. We at Aave believe that using dapps should not be that hard as it is today. I think a couple of years ago we (and rest of the dApp community) went wrong when they started to use browser extension-based wallets. It’s really difficult for newcomers to understand how to use dApps.

How have your architected your company? How do you and your team communicate internally? Do you use any project management tools and stuff?

We are a team of 17 bright minded and talented individuals. Aave has its headquarters in Switzerland and we have an additional office in London, UK. We use to be more distributed team across the globe but decided to get together and things have been going great. We communicate mostly with internal messaging platforms but nothing is as great as face-to-face discussions and brainstorming sessions.


5 leadership lessons for blockchain entrepreneurs.

1. Listen to others

2. Be open-minded

3. Inspire people

4. Make friends

5. Enjoy what you are doing


Part III: The future - Aave, DeFi, Agnostic.

Tell us something new Aave is planning…? And what challenges do you see in the future for Aave?

At Aave, our aim is to embrace decentralized finance. Simple as that. However, we know that decentralized finance (DeFi) requires a gateway as well. Hence, we are focusing on creating new dApps for DeFi and in parallel apps to onboard more users to use blockchain technology. I think in the future, we would be something in between blockchain and FinTech, which is quite an important demographic when we consider mainstream adoption.


What do you perceive as the future of DeFi? And what impact do you hope to have on the industry?

The future of DeFi depends on mainstream adoption. If DeFi reaches mainstream cryptocurrency users (first), it will be a huge game changer. The adoption of DeFi depends on the growth of the whole ecosystem. The more DeFi protocols and dApps we would have in the Ethereum ecosystem, the more likely we get users to onboard.


DeFi has an extreme impact in use-cases where traditional finance is broken or does not provide a solution for an issue. I do not consider that all finance should be decentralized but I do consider that is should be applied where it repairs the system or generates value proposition, that is the real impact.

Anything else that you’d like to share with the community?

I have been using dApps for the past three years and the ecosystem has grown a lot. If you are like me who cares about decentralization, teach your friends about dapps and why they are the coolest things out there.

You can follow Stani on Twitter and LinkedIn.

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