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Aave, one of the most established DeFi protocols, is launching a money market.
The development is thanks due to a partnership with CrescoFin, a Swiss banking company advocating for the advent of decentralized finance.
CrescoFin announced the collaboration in a Medium blog post on Tuesday, citing the benefits of offering insured savings in DeFi, as well as Aave’s strong security credentials. The Swiss firm highlighted its plans for “institutional adoption,” pointing to Aave’s focus on security as a “needed prerequisite” to attract potential investors.
The subject of “institutional money” has been an ongoing point of discussion in the blockchain space. While several large-scale investors have warmed to Bitcoin in recent months, certain signs suggest that institutional adoption has been slower within DeFi.
CrescoFin says it hopes that the integration with Aave will offer investors a “safe savings account option,” in turn ushering in a wave of adoption. The firm has also confirmed that proof of reserves and price information will be sourced using the price oracle Chainlink.
The money market will enable investors to deposit funds into the protocol, with insured tokens provided in exchange for adding collateral. The tokens will then get burned when the investor withdraws their funds.
Higher rates will be paid to those who lend funds on a longer timeframe, effectively creating what’s known as a “yield curve.” It could also enable DeFi users to use “money legos”—a phrase often used to describe the process of interacting with multiple smart contracts with composability.
It’s a promising sign of progress for DeFi as a whole. The announcement points out that insured savings are not yet available in DeFi, but are widely considered fundamental elements of the traditional financial system.
CrescoFin highlighted Aave’s standing as a key player of the DeFi ecosystem, specifically the team’s “reassuring, long-term commitment” to the space.
“The amount of institutional money that will likely enter DeFi over the next few years is enormous and Aave is well placed to capture a meaningful amount of these funds,” they wrote.
Aave has quickly become one of the most used DeFi protocols. Today, its total locked value is around $1.3 billion, an increase of a factor of 4,000 since the start of the year.