Money Market Protocol Aave Settles $300 Million in Defi Flash Loans
September 2, 2020
This weekend the decentralized money market protocol Aave broke records as the community witnessed a massive flash loan of $14 million worth of the stablecoin DAI. So far, the Aave protocol has seen over $300 million in flash loans to-date and this trend doesn’t seem to be abating any time soon.
In just a short period of time, the Aave protocol (the Finnish word for “ghost”) has seen enormous demand. Essentially, Aave is a decentralized finance (defi) protocol that currently has 19 supported tokens including ethereum (ETH).
To-date the total-value locked (TVL) is around $1.5 billion at the time of publication. Aave allows for unique lending and borrowing experiences like flash loans, credit default swaps, and credit delegation.
Flash loans are a unique concept that allows the user to borrow funds without the need for collateral.
“Flash Loans are the first uncollateralized loan option in defi,” the Aave website explains. “Designed for developers, Flash Loans enable you to borrow instantly and easily, no collateral needed provided that the liquidity is returned to the pool within one transaction block.”
On August 29, a user executed Aave’s largest flash loan of $14 million worth of DAI and so far Aave has seen $300 million in flash loans. More than half of the aggregate of flash loans settled were executed during the month of August.
Data from the web portal Aavewatch shows that flash loans executed from July 30 to September 1 saw an increase of 117%. The month prior defi flash loans using Aave increased by 809%.
Despite the Aave website explaining that flash loans are for developers, a number of people without programming abilities are leveraging these types of uncollateralized loan options.
Today there’s a couple of online tools that create defi composability. This means any user can leverage a number of defi apps in a lego-like fashion and execute the actions in a single transaction.
One tool called Furucombo is a defi application that creates “defi legos” with a number of protocols. However, the creators warn that “Furucombo is beta software, and it should be treated as highly unstable.”
Despite the warning, users can leverage the application to create defi composability with applications like Aave, Maker, Uniswap, and Curve.fi by simply connecting a wallet.
“Create customized defi legos and put all strategies into one transaction,” the tools website notes. “Pick up a defi protocol you want and set up the inputs. You can then send the transaction or pick another defi protocol. Drag the cube to rearrange the order of your actions. Once you’re ready to send out the transaction, connect your wallet and click ‘Send.’”
Another application, called defisaver.com also offers functionality with Aave, Maker, and Compound.
Users can connect their Metamask wallet or hardware wallets like Trezor and Ledger as well in order to access defisaver.com’s user interface.
This will allow for a connection with a defi protocol’s default app like Aave’s platform. Users can then create a traditional account but also build a smart wallet. Defisaver.com’s smart wallet feature provides a personal smart contract wallet that will enable the usage of advanced features.
What do you think about the Aave platform issuing $300 million in flash loans? Let us know in the comments section below.