Adding staked AAVE as collateral?

Other
#1

Hello AAVE people!

Are there plans to incorporate staked AAVE as collateral? I have AAVE tokens and would love to stake and get rewards, as well as have it as collateral.

Currently, if I stake my AAVE tokens, I lose their collateral power.

Is this possible? or is there a technical problem which prevents having them used for both cases?

Thanks for your time :slight_smile:

5 Likes
#2

Thanks for this question. The community has been discussing the possibility of adding stkAAVE as collateral, which is possibly something that will be increase the utility of AAVE. At the same time, the main technical risk i see is that stkAAVE is already being used as collateral itself, since it protects the Aave protocol from shortfall events. On the other hand though, V2 will open up the possibility of easily bootstrapping new markets, which may very well bring the possibility of creating a separated market for stkAAVE not covered by the Safety Module. So if a shortfall event happens, the other markets are not impacted by the slashing of the staked AAVE.
Would love to hear the communiy opinion on the topic.

3 Likes
#3

I think it is a great idea but personally don’t know all the technicalities behind it. By combining the capability of staking (StkAAVE) with the use of collateral actually would boost the incentive to stake and secure the platform. I understand there are risks but currently you either have staking or not with the use of collateral. So if users want to use Aave as collateral they are not staking, so the question would be, would enabling staked Aave as collateral actually incentivize more users to stake in the Protocol (this reducing individual staked rewards) and would that be healthy for the ecosystem? And, would this help reduce the risk of the platform since you would likely get more users to stake Aave vs. users who want collateral and are not staking at all?

Again, I like the idea in combining rather than one capability vs the other.

2 Likes
#4

imo if the token could do both things, it would be so much more valuable, and staked AAVE amount would no doubt go up, same as being used as collateral, would probably go up since staked users are missing out on that usecase

2 Likes
#5

Adding increased functionality for StkAAVE is something I think we need to do in order to increase the value of AAVE. As currently constituted, it’s clearly lacking use case outside of governance (imo). Maybe we could get someone like Gauntlet to simulate scenarios where StkAAVE has collateral functionality and see how that interacts the shortfall protection AAVE provides to the protocol.

2 Likes
#6

I think this is a great idea - it would attract more stakers and increase the value of AAVE - it would reduce the APY of stkAAVE, but now we have a good relationship with CURVE so maybe they could establish a stkAAVE pool for some extra APY and CRV bonus? :slight_smile:

2 Likes
#7

I saw this topic come across twitter today too.

I think we could accommodate this by only allowing 70% of the xAAVE value to be used as collateral. Since the stakers are on the hook for 30%.

That way the 30% would still be available as a loss backstop.

While we’re at it I think staked AAVE should be added to the Liquidity mining incentives.

1 Like
#8

what is the final conclusion about it? Any progress?

#9

Adding staked AAVE as collateral would be extremely handy in many ways…