How AAVE Holders Can Capitalize on AMPL Proposal
Aave is a DeFi lending platform that enables anyone to lend or borrow different cryptocurrencies. They currently support 23 crypto assets on the platform including stablecoins and DeFi blue chips, but they don’t support their own native cryptocurrency $AAVE.
But why?
There is a reason you can’t borrow the $AAVE token from the Aave platform itself and it’s because of this:
If Aave supported $AAVE borrowing, any team that submits a proposal to get listed on Aave could just borrow $AAVE tokens to get themselves enough votes to push their proposal further. This is something the Aave team anticipated, which is why they made borrowing $AAVE impossible on their platform.
So what are $AAVE token holders left with if they can’t lend or borrow their tokens?
They can stake their $AAVE at 6% APY which is not great, not terrible; but on top of that it bears the risk of slashing:
There is a platform that AAVE didn’t see coming
Meet Yield Credit.
Yield Credit is a new and innovative Peer-to-Peer DeFi lending platform that offers not only incentivized lending (via interest as per usual) but also incentivized borrowing for any ERC-20 token.
And yeah, this is a BIG deal!
Yield Credit replaces the pooled money-market model of Aave and Compound with an individualized, Peer-to-Peer (P2P) model that enables you to lend or borrow any ERC-20 token with a Chainlink oracle price feed.
With that, Yield Credit goes far beyond what Aave and Compound offer:
You see that $AAVE logo? Yes, that’s correct.
$AAVE holders can finally lend their beloved ERC-20 at much higher rates than $AAVE staking offers.
Now, let’s compare two scenarios:
Scenario 1: If you have $50K in $AAVE (130 tokens) and you put it into staking on Aave, you can get around $3,000 in $AAVE in a YEAR at the current APY.
Scenario 2: If instead, you put that same $50K in AAVE (130 tokens) on Yield Credit, you can make $6,250 in under a MONTH just by setting your own terms of the deal.
The Great Opportunity for AAVE Holders
If you’re an $AAVE holder that actively participates in Aave governance proposals, you know by now that $AMPL is going through a proposal stage for its aAMPL token implementation on Aave.
There are currently only 4 days left for the proposal to be passed and so far it is short 10K $AAVE tokens to make it. Here are the live stats:
Proponents of this proposal are kind of stressing out right now as they desperately want to see it pass:
So, what’s the opportunity here for $AAVE holders?
The opportunity is that people are literally begging to pay you for borrowing your $AAVE so they can use these borrowed $AAVE tokens to vote on the $AMPL on Aave proposal:
Take this offer for example from the screenshot above, you will literally receive 1.5 $AAVE denominated in $AMPL after 45 days. That’s $580 for lending out $9,600 in $AAVE for 45 days at a fixed 6% interest rate.
It’s a no-brainer.
If you hold $AAVE and are looking for ways to earn a yield on that capital, there is currently lots of demand to borrow $AAVE via Yield Credit and the APY % you earn for lending it out cannot be beaten.
A win-win scenario for both
In that deal described above, everybody wins. $AAVE lenders receive the impressive fixed interest rates and $AAVE borrowers get to use that $AAVE to vote.
Also, even if the incentive to borrow $AAVE for voting wasn’t there, borrowers would still be incentivized by Yield Credit alone. You see, borrowers can earn up to 3.5 $YLD (worth $150+ atm) for maintaining healthy loans and repaying on time.
So, if you combine these incentives, $AAVE borrowing is in really hot demand right now and $AAVE token holders can capitalize on this opportunity to earn high yields and to help pass the $AMPL on Aave proposal.
How Yield Credit will suck Lending Liquidity
Yield Credit is the first P2P lending service for DeFi that enables anyone to lend or borrow any ERC-20 token. In this way, Yield is 100% inclusive and acts as a gateway to lending and borrowing an ocean of ERC-20 tokens that couldn’t previously be lent out.
You see, existing DeFi lending platforms like Aave and Compound are not 100% inclusive; they allow anyone to lend/borrow assets regardless of size, but they only support a handful of ERC-20 assets.
Therefore, these existing platforms are leaving billions of dollars in ERC-20 capital on the sidelines and Yield Credit is swooping in on this untapped market, opening the floodgates to an immense amount of capital that couldn’t previously be lent out or borrowed.
It’s ALREADY happening with $AAVE
As described earlier, people are literally begging to borrow $AAVE on Yield Credit and will pay sizable interest to do so. $AAVE holders can make bank by lending out their $AAVE because there’s so much interest from borrowers and this is what ultimately attracts liquidity to Yield Credit.
And mark my words, there will be more demand to lend and borrow assets that are not supported elsewhere due to attractive interest for lenders and to leverage Yield Credit for DAO votings.
For instance, just like how $AMPL fans are borrowing $AAVE so they can vote on the $AMPL on AAVE proposal, there will be other instances where people leverage Yield Credit for DAO votings and it will change the whole decentralized scene.
But wait, there’s more.
Yield Credit will not only suck in liquidity from ERC-20 capital left on the sidelines and from tokens used in DAOs, but it will also suck in liquidity from tokens already supported on existing lending platforms.
Let me explain:
DeFi lending platforms like Aave and Compound have large TVLs (Aave: ~$6B & Compound: $10B). However, nearly 60% of Aave’s TVL and ~50% of Compound’s TVL are not being utilized (borrowed or lent out).
This is a real issue because it means the demand to borrow these assets is not really there and yield is relatively low as a result. In fact, lenders on Aave and Compound have to be careful that their rates don’t trend towards 0% when there are too many lenders and not enough borrowers.
Lenders on Yield Credit, however, don’t have to worry about market dynamics causing their rates to trend towards ~0%. That’s because, on Yield Credit, the users are in full control.
When you create a lending offer or borrow request, you can choose anything from 2% up to 12.5% interest with any duration. Also, Yield Credit not only incentivizes lending (via interest as per usual) but also incentivizes borrowing by rewarding up to 350 $YLD for maintaining healthy loans and repaying on time.
That said, borrowers are literally incentivized to use Yield Credit to earn $YLD, and lenders are incentivized to use Yield Credit for guaranteed fixed interest rates.
Therefore, unused capital for lending at Aave and Compound will flee, seeking better and fixed returns at Yield Credit because there will be more borrowers as they are incentivized with $YLD rewards.
