{"id":151104,"date":"2021-01-10T04:37:21","date_gmt":"2021-01-10T01:37:21","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/proposal-seeks-to-overhaul-aaves-375-million-safety-module\/"},"modified":"2021-01-10T04:37:21","modified_gmt":"2021-01-10T01:37:21","slug":"proposal-seeks-to-overhaul-aaves-375-million-safety-module","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/proposal-seeks-to-overhaul-aaves-375-million-safety-module\/","title":{"rendered":"# Proposal seeks to overhaul Aave\u2019s $375 million Safety Module"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a30886944c86\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a30886944c86\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/proposal-seeks-to-overhaul-aaves-375-million-safety-module\/#Market_solutions\" >Market solutions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/proposal-seeks-to-overhaul-aaves-375-million-safety-module\/#VCs_in_DAOs\" >VCs in DAOs?<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Proposal seeks to overhaul Aave\u2019s $375 million Safety Module <\/strong>&#8221;<br \/>\n<img decoding=\"async\" src=\"https:\/\/images.cointelegraph.com\/images\/840_aHR0cHM6Ly9zMy5jb2ludGVsZWdyYXBoLmNvbS91cGxvYWRzLzIwMjEtMDEvNWNhZDU0Y2EtOTM0OC00MzVjLThjNjItNGQ4NzA5NGYxYWNmLmpwZw==.jpg\" \/><\/p>\n<div class=\"post-content\" data-v-5a136f3a>In a largely celebratory community <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.youtube.com\/watch?v=1zn8yHLGEck\">call<\/a> devoted in part to commemorating lending protocol Aave\u2019s January 8th \u201cAaveversary\u201d \u2014 a full year of Aave on Ethereum mainnet \u2014 there was also a look into Aave\u2019s possible future: a proposal from Delphi Digital seeking to fundamentally alter Aave\u2019s Safety Module and create a new insurance product offering.\u00a0<\/p>\n<p>Currently, $aave governance token holders can stake their tokens in the Safety Module, a pool of liquidity designed to help insure the protocol against a \u201cshortfall event\u201d such as a smart contract exploit. Stakers risk up to 30% of funds they lock in the Module, but earn a yield in return (currently 4.66%). The Safety Module pool has attracted nearly $375 million in deposits, comfortably the largest decentralized insurance fund of its type. <\/p>\n<p>However, according to Jose Maria Macedo and Jonathan Erlich, a partner and an analyst respectively at Delphi Digital, there are a variety of flaws with this current system. For instance, the Security Module covers the entirety of the platform, meaning it\u2019s difficult to determine market <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>etite for coverage; there are additional systemic risks with each new project listed on Aave; and Safety Module depositors are covering all projects at different individual levels of risk at the same rate. <\/p>\n<h3><span class=\"ez-toc-section\" id=\"Market_solutions\"><\/span>Market solutions<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The Delphi Digital proposal seeks to overhaul the Safety Module system and create a market-based solution to these flaws.\u00a0<\/p>\n<p>\u201cIn our most recent proposal, rather than insurance being bundled in with all deposits, it is instead offered as a separate product on the demand side,\u201d said Macedo and Erlich in an interview with Cointelegraph. \u201cThis makes it possible to compute cover demand and capacity precisely and thus price risk using market mechanisms.\u201d<\/p>\n<p>Their proposal would add an option for depositors to have a covered deposit or an uncovered one, with the covered deposits offering a lower interest rate in order to account for the cost of the insurance. This would allow the development of a more robust and complex market between Safety Module stakers working within different risk tranches and depositors greater capital efficiency as they can decide what degree of insurance they need. <\/p>\n<blockquote><p>\u201cWe believe [this] design is more efficient because rather than imposing a uniform insurance cost across all Aave money markets, it can instead price each asset independently based on the specific risks associated to it,\u201d said Macedo and Erlich.\u00a0<\/p><\/blockquote>\n<p>Perhaps most excitingly, this system could become a \u201c<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/general\/\" data-internallinksmanager029f6b8e52c=\"3\" title=\"General\" target=\"_blank\" rel=\"noopener\">general<\/a>ized insurance\u201d product from Aave designed to compete with projects like Cover and Nexus Mutual.\u00a0<\/p>\n<p>\u201cWith existing insurance solutions users have to purchase cover upfront which entitles them to insurance on a given protocol for a set amount of time (generally at least 6 months). With the current state of DeFi, most users don\u2019t know where their capital will be next week let alone 6 months from now [&#8230;] With our architecture, users only pay for insurance while they use it and the process of buying\/selling is abstracted away entirely.\u201d<\/p>\n<h3><span class=\"ez-toc-section\" id=\"VCs_in_DAOs\"><\/span>VCs in DAOs?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The proposal is notable not just for potentially introducing a whole new product line into the Aave ecosystem, but also for who architected it: while Delphi Digital offers research and consulting services, they also house a venture capital wing.\u00a0<\/p>\n<p>Because of their open, permissionless nature, DAO-governed projects such as Aave can house all kinds of members, including VCs. However, many observers have criticized projects for taking venture capital money prior to decentralizing governance, and believe that the influence of centralized entities can conflict with a wider community\u2019s vision and goals. <\/p>\n<p>In Delphi\u2019s case, however, they may be demonstrating how VCs can help push a project forward.<\/p>\n<p>\u201cCapital is abundant in crypto and when we invest in a project, our goal is never just to invest money but also our team\u2019s intellectual capital and time to help drive it forward,\u201d said Macedo and Erlich. \u201cWe\u2019re working on multiple proposals right now and have a long backlog of ideas for proposals and changes we want to make to others.\u201d<\/p>\n<p>While this kind of activism no doubt benefit\u2019s Delphi\u2019s bottom line, it\u2019s also a larger bet of the future of DAOs generally.<\/p>\n<blockquote><p>&#8220;In terms of DAOs, we see them as the next evolution in human coordination. In the long-term, we believe the long tail of organisations will be structured as DAOs, taking advantage of their internet-native, borderless nature and of the efficiency\/automation advantages they provide.&#8221;<\/p><\/blockquote>\n<p><template data-name=\"subscription_form\" data-type=\"defi_newsletter\"><\/template><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/proposal-seeks-to-overhaul-aave-s-375-million-safety-module\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Proposal seeks to overhaul Aave\u2019s $375 million Safety Module &#8221; In a largely celebratory community call devoted in part to commemorating lending protocol Aave\u2019s January 8th \u201cAaveversary\u201d \u2014 a full year of Aave on Ethereum mainnet \u2014 there was also a look into Aave\u2019s possible future: a proposal from Delphi Digital seeking to fundamentally&#8230;<\/p>\n","protected":false},"author":1,"featured_media":151105,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.cointelegraph.com\/uploads\/2021-01\/5cad54ca-9348-435c-8c62-4d87094f1acf.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[75186,74891,77595,70299,71745],"class_list":["post-151104","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-dao","tag-ethereum","tag-lending","tag-insurance","tag-venture-capital"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/151104","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=151104"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/151104\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/151105"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=151104"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=151104"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=151104"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}