Aave protocol founder Kuchelov reveals his 2022 predictions

Stani Kulechov talks layer twos, the future of Aave and the biggest risk to the sector

The Aave logo on a blue and purple layered background                                 
Aave version three recently launched, making the protocol more capital efficient and risk adverse – Photo: Shutterstock
                                

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AAVE has taken the crypto world by storm and become the leading decentralised finance (DeFi) protocol, according to DeFi Llama. So, it was no surprise that the founder of Aave, Stani Kulechov, was swarmed by crypto enthusiasts, developers and investors after his talk at the CryptoCompare Digital Asset Summit at Magazine London.

Since launching in 2020, Aave has captivated both the minds and wallets of DeFi investors. Its lending pool-focused platform has been deployed across seven different networks with $23bn worth of liquidity locked in among them.

From his talk, Kulechov is clearly fascinated by how quickly the industry can improve and transform. He said: “The rate of innovation has been one of the most exciting things about this space.”

The Aave founder spoke with Currency.com about the future of Aave and the wider defi space.

Kulechov’s DeFi predictions

As Kulechov noted, DeFi is a rapidly changing landscape where platforms are keen to stay relevant and innovative. The next trend to hit DeFi this year is layer twos, according to Aave founder.

He said: “I think there is going to be a lot of adoption in the layer twos, basically Optimism, Arbitrum and Metis, the new layer two.”

These secondary protocols built on top of blockchains have already started weaving their way into DeFi platforms. Aave itself has integrated Arbitrum. Its website describes it as “an L2 rollup deployed on Aave for secure, fast, transactions”.

With Ethereum’s large gas fees and its slow speeds, a real need for capital-efficient layer twos has emerged in the DeFi space. As a result, more solutions have been popping up. Kulechov said: “There’s new competition on the blockspace, that’s my take on it.”

He even revealed that there is a proposal from the Aave community to launch on Metis, the newer layer two. But this depends on “how eager the community is”, as Aave’s decentralised nature means it relies on votes to make any major network decision.

The latest Aave news and the future of Aave

Aave has proved there is demand for a decentralised lending platform that offers high yields. Yet many new protocols have been launched since Aave was founded. Kulechov has already thought out how to keep the protocol’s industry leading reputation.

Rather than a focus on Aave coin or the Aave price, the general roadmap of the platform is to continue developing the protocol, making it “more capital efficient” and “risk adverse”.

Aave has recently addressed these goals with the launch of its version three update in March 2022. The new upgrade introduced faster transactions, reduced gas fees and new management features. One of the most interesting new features was its interoperable portals, allowing assets to be seamlessly transported to different blockchains.

“I think for Aave, the scalable way is to figure out cross-transactioning between different networks and to the Aave pools to make it capital efficient,” Kulechov said. “That’s the next focus point for the Aave community.”

DeFi’s biggest risk

The magic of the sector is that there is a low barrier to entry for investing and staking these DeFi coins. The purpose of the industry is financial inclusion, bringing high rates to the masses. This is reflected in Aave, the founder said: “In our protocol for example, the idea is that in any part of the world you can have the same opportunity and the same yield.”

But Kulechov says the biggest risk the sector could face is a shift towards low yields, bringing down any DeFi price prediction. He explained: “By low yields, I mean that financial ecosystem that doesn’t bring additional value to the users. It is something that I will be concerned about, because the idea of finance is not to make bitcoin’s price switch, it’s just to move that vault to everyone.”

Aside from this concern, Kulechov does see a strong future for the sector. He says it will soon merge with the wider finance industry. “Everyone who will be using DeFi, if my dreams come true, will be in the same way we use https or IP protocols, without knowing that we are using them.”

FAQs

The mostly optimistic Aave predictions believe so, with PricePrediction and Gov Capital expecting it to pass $1,000 within the next five years. However, WalletInvestor describes the token as a “bad” investment, saying the Aave price will be $21 in a year. Forecasters can be wrong, so investors should always carry out thorough due diligence.

Stani Kulechov, Aave’s founder, says the protocol will continue to be focused on making the platform more capital-efficient and risk-adverse. It is also homing in on cross-chain functions.

Kulechov says DeFi is important as it is is bringing high rates to the masses. This financial inclusions means everyone is able to earn with the same yield rates.

Further reading

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