In this conversation, Stani Kulechov joins moderator Casper Johansen to explore how new market infrastructure like Aave V4 is enabling scalable onchain credit markets by unifying liquidity while isolating risk. The discussion will focus on how this unlocks new financial products—from structured credit to RWA-backed lending—and what still needs to happen for institutions to participate at scale.
Questions asked in this interview
5
10:30How will that work and how do you see the non-crypto native kind of lenders or borrowers or people seeking credit using that?
13:57And in terms of these credit lines you mentioned being extended, how does that decision-making process work and how is the risk assessment done for those credit lines in terms of how much to extend, the cost of the credit line, etc.?
17:08... seen as a precursor like a sandbox ahead of this full V4 where it's kind of now Horizon's kind of out there for eventually everyone to do these type of products or is it still remaining there and is it a separate isolated vertical still?
19:29Like what are they waiting for anything or is it just kind of a process that you see that has started and it just kind of will build with time?
21:55And obviously I believe Aave Pro is now online too, right?
Hello everyone. It's great to meet you all. My name is Elod and I'm chief operating officer at Kaiko. It's been a pleasure to host you most of the day and continue a bit later this afternoon and tonight for the cocktail in this beautiful setup. I'm extremely pleased to welcome two amazing speakers on stage for a fireside chat. So we'll have Aave CEO and founder Stani Kulechov and Spartan Group's partner and co-founder Casper Johnson. Please join me on stage.
Hey everybody, thanks for joining. Stani, thanks for joining today. I'm really glad to be here. So big day yesterday with the V4 announcement. Congrats on that. And you said it's just the beginning. So I'm looking forward to unpacking what that means today. But maybe just for the benefit of the audience, if you could give a high level overview of what is V4 and what are the big changes versus the V3 that most people will be familiar with.
Yeah, I mean it has been a big day yesterday particularly because of the Aave V4 launch and it's been a significant undertaking for the Aave Labs team. We've been working on the project for the past couple of years and launching something really like a protocol is definitely one of the hardest things to do. And obviously we have a really great team that has been working on that heads down for a very long time. And I mean for obvious looking at the sort of timeline and history we've been able to really capture the market share on digital assets in terms of like lending and borrowing and that has been like the big success for us and becoming the largest DeFi protocols. And one of the moments that like really felt good was a couple of years ago when actually Aave really grew to become like bigger than centralized crypto-backed lenders at some point. And that was a really big milestone for us because we sort of started the same time back in 2017 building lending against digital assets. And now going forward obviously we think that the space will grow also with RWA and tokenization. So the native assets will keep growing lending against Bitcoin and Ethereum and further especially as banks and institutions are actually adopting more custody solutions and custodying digital assets. And the way we built the Aave V4 protocol was in mind that in the future maybe you want to lend against ERC20s as today ERC721s, but also you might want to just lend against a collateral that is sitting in qualified custodians or BNY and so forth. So I think this is for us particularly a big opportunity to transition from being a lending protocol to a credit protocol and being able to tap into opportunities that exist in traditional finance and fund those opportunities and sort of taking the liquidity that is aggregating on chain and then channeling that back into the real world and funding opportunities.
Okay. So I know that for the launch you're doing kind of a limited launch sense of you have certain pre-approved spokes or credit liquidity or credit strategies and then you have Chainlink as the oracle over. If you think forward in terms of over time once you have the full launch, can you explain a little bit in terms of what you guys mean with the hub and spoke model and then the shared liquidity pool? How will that work and how do you see the non-crypto native kind of lenders or borrowers or people seeking credit using that?
Yeah, I mean the DeFi lending typically has a challenge, right? So you can either be very capital efficient and then that means that you pull a lot of the liquidity or the other side of the spectrum where you segregate risk as much as possible and in the cost of capital efficiency. And Aave historically has relied on the pooled model because that allows a better user experience and also capital efficiency for the users. And the sort of biggest challenge is that when you have new use cases in new markets that you want to deploy with dedicated risk profiles, you have this challenge of actually seeding the liquidity of these new markets and typically how lending protocols have solved that problem is through incentivization or paying for seed liquidity. With Aave V4 hub and spoke model, the liquidity is actually sitting in the liquidity hubs. And the liquidity hubs are giving credit lines to these so-called spokes which have a configuration of what collateral can be used at what collateral factor. So how much you can borrow against the collateral that you are depositing into that hub and spoke. So what we are basically created is this ability to reuse liquidity that is already established in the protocol and fund new use cases and for a lot of the builders in the space. What it means is that we can actually inject liquidity into new use cases and new innovation without actually having the problem of bootstrapping liquidity for credit use cases and channeling value and channeling credit towards these new use cases. It means that we can create spokes that have custom logic. For example, lending against real life credit can be consumer loans, business loans or institutional loans or the previous example where collateral is just stored somewhere else than on chain. And I think that is sort of like an optimal way to scale decentralized or on chain lending into new use cases without crashing into this liquidity fragmentation and bootstrapping issue.
Got it. And in terms of these credit lines you mentioned being extended, how does that decision-making process work and how is the risk assessment done for those credit lines in terms of how much to extend, the cost of the credit line, etc.?
Yeah, the credit lines is still the risk assessment is still based on the Aave governance model. So obviously risk managers are assessing all the risk parameters and signing off and then there is obviously the process of getting these parameters live. So there's also an opportunity to actually create completely permissionless hubs and spokes to institutional use cases and I think that might be very interesting. But as a system why it's so successful is because a lot of the parameters are pre-vetted and the markets are pre-vetted. So you can't really list a collateral that maybe has risk that basically the system would not accept based on the risk assessments. So there is a sort of a multi-layered process how collateral or new hubs and spokes can get listed and deployed.
