Long Thesis - Aave

Mar 29, 2023 • 11 Min Read
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Introduction

Founded by Stani Kuchelov, Aave (formerly LEND) is the largest DeFi lending market by TVL (~$8b across v2 and v3) and the fifth largest dApp overall. The protocol is currently live across five networks and 11 markets, hosting more than 30 assets across its platform. In July ‘22, Aave announced that they are launching their native stablecoin, $GHO, in the near future. Apart from allowing users to mint against yield-bearing assets, we believe that GHO possesses a few features that will catalyze the re-pricing of Aave.

Market Tailwinds

Centralized Stablecoin Risks

In terms of timing, the thesis accrues some tailwinds from the recent stablecoin saga stemming from Silicon Valley Bank’s bankruptcy, where USDC and USDC-adjacent stablecoins lost their pegs because their reserve deposits were in the startup-focused bank. The irony is not lost on us that just under a year ago, $USDT was the stablecoin in the spotlight after $7b in withdrawals raised concerns on its backing. Such is crypto.

Given the custodial nature (and risk) of fiat-collateralized stablecoins, we believe there is a market for an asset overcollateralized stablecoin and expand below on the competitive advantages G...

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