Back to Day One

I've been building in decentralized finance for close to 10 years. In that time, Aave has grown into the largest, most battle-tested lending protocol in DeFi, built by Aave Labs and DAO of service providers who believed in what this technology could do. Together we built the only decentralized protocol that has originated over $1 trillion in loans across multiple market cycles and has survived crashes that ended many of our centralized competitors.

While this is an incredible feat, how do we turn this foundation into something that makes Aave one of the world’s most important pieces of financial technology?

Where We Are Today

The internet's greatest gift was access to information. Onchain finance's greatest gift is access to participation, where anyone in the world can use the same financial infrastructure and have a say in how it's governed. That's what we've been working toward, and Aave has made more progress than most.

But if we’re being honest, DeFi only feels large from the inside. From the outside, it's still a drop in the ocean. Aave holds around 30% of DeFi’s total TVL, which sounds impressive until you remember that we're talking about 30% of a pie that hasn't grown much since 2020. To put it in perspective, there is around $120 billion in DeFi right now, which is where TVL stood in August 2021.

Meanwhile, the global lending market runs into the tens of trillions of dollars. Mortgage lending in the US alone is roughly $12 trillion. The difference in scale between the on and off chain economy is extreme.

Outside of significant market dominance Aave is, by almost any measure, the most mature DAO in DeFi. We have more active governance participants and more protocol history than anyone else in this space. That matters, and it's genuinely hard to build, however it’s not a moat. A well-funded team with a decent offering and no legacy decisions to defend can move faster than we can. The size of the opportunity we're pointing at is exactly the kind of prize that attracts serious competition, and we should expect it.

DAOs Are Not Dead, They Should Evolve

I'm going to say something that many founders in crypto think but very few will say publicly. DAOs, as we've been running them, are extraordinarily difficult, and not in the way that building hard things is difficult. They're difficult in the way of fighting your own organizational structure every single day. And while there are some ways to increase shipping velocity, proposals that should take a day can often take weeks of forum posts, temperature checks, and multiple votes. Meanwhile, your competitor ships and positions themselves against the “slow DAO.”

DAOs also become politicized very quickly and it's easy for voting to become about attention. Participants take sides, lean toward the loudest voices, and form political alliances to get their own proposals passed later. Just as large companies end up with managers instead of founders, DAOs end up with politicians. That skill doesn't help you innovate or run an economic unit efficiently, and when politicians win, it's game over for builders.

It can often feel like we took the worst parts of corporate bureaucracy and removed the parts that create accountability in the name of decentralization. But that doesn’t mean DAOs are doomed. They are far from that.

The model we need is one that keeps what DAOs got right and fixes what they got wrong. The rules should stay in the code, the treasury should stay visible to everyone, and token holders should keep safeguards on major decisions. But founders and teams have to lead execution. Someone needs to wake up every morning with the full context in their head and make hard calls. The difference is that their decisions and performance are all onchain and transparent, and token holders can fire the team when objectives are not met. Accountability is verifiable, and that is what separates this from a traditional company. There is no vendor lock-in.

Governance should focus on what genuinely requires collective input, like major protocol changes and treasury strategy. Everything else is execution, and execution requires leaders in an organization. Tokens and governance can actually be a solution to public markets that are broken. We truly have now an opportunity to build better onchain businesses, and better ways to capture value for the tokenholders with startup-like execution energy.

Aave is Built To Last

Aave has great technology, and V3 has proven that over time by becoming the most trusted lending protocol in DeFi, securing over $40 billion worth of assets. That kind of trust was not achieved overnight. The Aave community has been working tirelessly for the better part of a decade to get here, and the great news is that V3 is now mature infrastructure that does not require any major changes to continue maintaining the experience people know and love today. It has proven itself and will continue to thrive.

To grow the DeFi pie altogether, though, we need infrastructure that can serve all of the world's lending use cases. If Google's mission was to organize all the world's information, Aave's mission is to rearchitect all the world's lending infrastructure by providing better access to capital and a better cost structure for any lending use case, which is what brings DeFi to everyone. That is an ambitious goal, and it requires ambitious technology, which is what Aave V4 delivers. At its very core, it’s a modular lending infrastructure that fits all use cases.

Focus and The Path Forward

Our team has always been focused on Aave, even during the four years of the SEC investigation. That period was particularly hard for me personally and I’m glad it’s now behind us so that we can keep moving forward.

To focus on our mission, I had to make hard decisions over the past year. The first was to retire the other products under the Avara umbrella so that we could redirect the talent building them entirely toward Aave. Over the years those projects brought in great people across engineering, design, and design engineering. Family in particular led to wallet infrastructure that is vital for the Aave App and for onboarding the masses into DeFi. In the last several months, Lens was acquired by an ecosystem company that could continue building it, and we sunsetted the Family wallet along with the Avara brand. The talent and the technology those projects produced are now fully behind Aave and arguably, we have the best smart contract engineers building Aave.

I also simplified our product offerings. In the past, the product layer was more of a necessary interface than a real product. Now with Aave App, Aave Pro, and Aave Kit, we have a focused product layer serving everyone from integrators to sophisticated DeFi users to consumers. Full stack DeFi, built on Aave V3, Aave V4, and GHO.

There will be more hard decisions ahead, but we now have a good foundation and multi-decade vision for Aave that is fully $AAVE token centric, which matters to me more than anything else. And in true Aave fashion, we’re looking to pioneer a model where revenue will come from both the protocol and product layers, vertically and horizontally, and anything that works in Aave App and Aave Pro will be available to all integrators through Aave Kit.

Our Aave Will Win proposal is about setting the foundations for Aave to become the most trusted finance brand that consumers, institutions, and everyone else can rely on. New revenue sources for the DAO are part of that, but the real aim is making Aave a legitimate player in our global financial system.

The opportunity ahead of us is measured in the hundreds of trillions, and we have the technology, the team, and the track record to go after it. Building this will take years of hard work, and even though we have been at this for nearly a decade, we are still at the very beginning of the Aave story.