Aave in Discussion of Risk Tranches for its Safety Module

Aave in Discussion of Risk Tranches for its Safety Module

By Abhimanyu Krishnan | News | 11 Jan 2021


Governance members of decentralized lending protocol Aave (AAVE) may consider risk-based insurance packages as part of its safety module system, according to a discussion during a community call held on Jan. 8.

  • The community call was celebrating Aave’s first anniversary since its mainnet launch, and covered several topic relating to protocol upgrades
  • The safety module proposal was put forward by members of research firm Delphi Digital, who said that a market-based solution would improve upon the current safety module system
  • Part of its Aavenomics upgrade, Aave’s Safety Module is a decentralized insurance fund that protects investors from events like hacks; it has amassed over $375 million in funding so far
  • The analysts reason that a built in option to ask the investor whether he or should would like insurance coverage for a lower interest rate could result in better capital efficiency and measurement of insurance demand 
  • As a result, coverage for different assets would depend on the risks associated with it, as opposed to having a one size fits all scheme
  • They go on to say that the product could help AAVE as projects like Cover and Nexus Mutual also release decentralized insurance products

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Abhimanyu Krishnan
Abhimanyu Krishnan

Technophile, cryptocurrency enthusiast and journalist.


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