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

Abhimanyu Krishnan
Abhimanyu Krishnan

Technophile, cryptocurrency enthusiast and journalist.


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