ARC: Deploying Aave on StarkNet

Governance New Market
1

ARC: Deploying Aave on StarkNet

Summary

A proposal for the progressive bootstrapping of the Aave ecosystem over StarkNet, StarkWare’s permissionless and decentralized ZK-Rollup.

Proposer

Yael Doweck, Product Manager at StarkWare, is submitting this proposal on behalf of StarkWare, the creator of StarkNet.

Abstract

We offer to onboard the Aave protocol onto StarkNet. This ARC details the opportunities for the Aave community from this effort and a concrete suggestion for the way forward. It is inspired by similar cooperation, which is already live between StarkWare and MakerDAO.

Motivation

With the success of the Polygon and Avalanche markets, deploying on StarkNet incurs additional value for Aave.

New Market

Sidechains, by nature, are not coupled with Ethereum’s state, with each sidechain having its own security model. However, in L2 solutions, and especially Validity rollups, security is strongly coupled with L1 security. I.e., the L2 Operator(s) can’t steal the user’s funds without compromising the L1 state.
Therefore, StarkNet attracts many users and applications that prioritize the security of their funds - users and applications that would be hesitant to onboard to sidechains.

New Opportunities

Liquidity Sharing protocol

StarkNet’s high level of security and its capital efficiency compared to Optimistic Rollups (i.e. shorter withdrawal period) would allow StarkNet’s Aave deployment to connect the liquidity between networks efficiently.

In addition, StarkNet would be highly interoperable with other platforms.

The opportunities in a Scalable Non-EVM compatible environment

The scalable environment of StarkNet offers a unique opportunity to revisit tradeoffs that have been done originally on L1 due to gas constraints and contract size limit - leading to a positive evolution of the protocol. The improved protocol logic could then be copied to other scalable environments such as Polygon.

An example of a system that evolved in the same process is dYdX. Like Aave, it is a liquidation-based L1 protocol that has been re-written in Cairo into a successful L2 protocol. In this process, dYdX was able to add cross-margin logic that was not feasible on L1 but simple to implement on L2. Although they run more complicated contracts on L2, they still enjoy a 1500x scale factor in their gas consumption.

Proven Performances

  • StarkEx, which is based on the same technology as StarkNet, is a leading L2 solution. It has 4 projects in production, including DeFi projects, and has proven 40 TPS regularly with unlimited peaks. Some of StarkEx’s clients will move to StarkNet as well and contribute to the ecosystem.
  • STARK Cairo Verifier has been in production for a while. There is one shared Verifier for all dApps running on Cairo. This significantly increases the assurance for this component.

StarkNet’s Ecosystem

StarkNet’s ecosystem is thriving with new DeFi and gaming applications (see the full list here) and partnerships with CEXs such as OKEx. In addition, StarkNet has many new development tools and they are progressing fast.

Implementation

General mindset

Following, and learning from, the similar effort done with Maker, we suggest the development of Aave protocol over StarkNet be done with an emphasis on the following aspects:

  • Working closely with Aave DAO: all the design considerations and risk analysis will be done with the consent of the Aave DAO to assure new novel ideas to the protocol and the actual implementation are in line with the DAO’s considerations and goals.
  • Accessibility: All the products of this effort will be available to the DAO for usage, learning, and audit purposes.
  • High development standard: All code written in this effort goes through an audit by external, respected audit entities. We will also test the product extensively to ensure it works as intended.
  • Working closely with the StarkWare team: This ensures the team is always well-informed with StarkNet’s technology updates, can advance quickly and take part in discussions regarding StarkNet’s design.
  • Divide the project into short phases: Since StarkNet contracts are written in Cairo, this requires a learning curve for the developers of the project, it makes sense to start with a small project first that will allow this learning experience and then progress to the full Aave implementation on StarkNet. Another benefit of this approach is to allow the Dao to monitor the progress more closely and make decisions in the second phase based on the gained knowledge from the first phase.

Project Roadmap

Phase I

The goal of this phase is to build something simple and useful that will show the potential of the technology. In this phase, the development team will focus on onboarding to the Aave protocol and StarkNet development stack.

One suggestion for phase 1 is an initial protocol for depositing assets to Aave on Ethereum L1 directly from StarkNet using a DeFi-Pooling scheme. This requires developing a smart contract that aggregates deposits from multiple users on StarkNet onto a pool of funds and deposits the funds to Aave on L1. The contract will distribute the aTokens from Aave L1 to StarkNet users according to their proportion in the pool. The contract will also provide the reverse strategy, aggregate aTokens from users, and deposit them to Aave on L1 to redeem their collateral.

This project would open the StarkNet market for the Aave protocol while keeping the project relatively small in scope.
We are open to more project ideas from the community for phase I.

Phase I will also include a deep-dive into the plans of phase II (detailed below) and writing a proposal for the DAO to approve phase II of the project.

Phase II

Phase II will focus on implementing the full Aave protocol on StarkNet and exploring possibilities to optimize it given the nature of the Rollup environment.

Organization, Funding and Budget

This project will be the official development for the Aave community built on StarkNet.

StarkWare, the core StarkNet protocol developer, proposes to co-fund this effort alongside the DAO on a 50/50 basis. The facilitator of this effort will determine the exact budget.

Next steps

  • Gather general feedback from the community about the initiative, and specifically about Phase I.
  • Define the final Phase I scope (facilitator), including budgeting and contributors.
  • Create a Snapshot vote.

Acknowledgments

Special thanks to Ernesto Boado (@eboado) and Emilio Frangella (@Emilio) for their ideas and research on how to take this project forward and their initiative to act as facilitators of the project.

20 Likes
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No brainer IMHO. Can easily see StarkNet capturing 80% of L2 liquidity in 2022.

7 Likes
3

So AAVE phase 1 on StarkNet would have the same rates and liquidity as AAVE on Ethereum mainnet?

I presume it would use the same assets and parameters as well?

That sounds cool.
Exciting development!

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4

The L2 I think we all were waiting for :heartbeat:

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5

This is the cooperation in question, focused on building a DAI bridge for StarkNet: Starknet wormhole implementation details - Core Units StarkNet Engineering - The Maker Forum

Developers mention non-trivial complexity of porting contracts from Solidity to StarkWare’s Cairo. I’m noting this to set DAOs expectations right - this is a full-scale engineering project, not a copy-paste into one more chain.

4 Likes
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Zk-roll ups such as Starknet have potential and will greatly aid Aave in bringing over value to the protocol. Optimistic roll ups also create the same value for Aave. In terms of security does Starknet have competitive advantage from a money market protocol perspective over optimistic roll ups?

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7

As an investor and long-term supporter of both projects, I think this is a massively win/win proposal.

7 Likes
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ZK-Rollups are highly interoperable with other L2s and side-chains due to their fast finality compared to Optimistic Rollups - a few hours in ZK-Rollups compared to 2 weeks in Optimistic Rollups.

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9

Completely agree that Aave should deploy onto StarkNet! Aave’s ability to deploy quickly onto interoperable L2s will enable the Aave ecosystem to scale quickly and is an important test of the feasibility and efficacy of deploying existing DeFi platforms on Ethereum onto ZK-roll ups.

@Yael-StarkWare What roadblocks do you envision occurring in terms of deployment onto Starknet from a development perspective (as moving protocols onto non-EVM compatible chains has proved time-intensive in the past ex. dYdX)? Additionally, what is the cost for Aave’s DAO that the StarkWare team is projecting for this deployment?

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Yes, I agree that the sooner we get Aave to StarkNet, the greater impact it will have. The first phase proposed in this ARC is developing a DeFi Pooling mechanism that will move funds to L1 Aave, this should be rather simple to implement but the development team will spend some time on the learning curve.
In phase 2, the full Aave will be implemented in Cairo from scratch, so it is a development project. StarkNet entails fewer constraints in terms of gas efficiency and contract size compared to Ethereum, so it will be a chance to improve the implementation.
The team implementing this will be external to StarkWare and Aave; The facilitator of the group - @eboado and @Emilio, will submit a proposal with the exact cost following the conclusion from this community discussion.

2 Likes
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I would like to put the spotlight on this at this point.
As described, this is a pure community project, so there should be participation in terms of ideas for Phase 1, apart for the one proposing on the opener.
Even if you are not technical, feel free to give suggestions and after checking the feasibility, the final one can be chosen via Snapshot.

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@Yael-StarkWare this is an awesome proposal - thanks for taking the time to bring it forward!

I am excited to see your collaboration with @eboado and @Emilio and enthusiasm shared by the community in the comments above.

Zk-Rollups and new L2s have a need in major protocols such as Aave.

I am particularly excited by StarkNet’s integration in governance toolings such as Snapshot and Zorro - besides the protocols listed, are there any additional partnerships or proposals in the works?

2nd question - how large of a learning curve is writing in Cairo? Is it similar to any other popular languages such as Rust or Solidity? Asking from a non-dev background.

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  1. Sure, there are many partnerships in the works, but we only announce those that are final :slight_smile:

  2. Got to admit that I’m biased, but will try to answer objectively. According to the feedback we got from developers, learning Cairo is pretty intuitive and straightforward for experienced developers. Developers were able to ramp up in a few days’ time.

And thank you for your support!

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14

After listening to @Hasu and Eli on Uncommon Core, i got to admit i cannot wait to have Aave deployed on StarkNet. I mean the example with DYDX they were talking about just blew my mind. The tech behind this is just insane. I mean i got to be honest, i don’t understand everything, but what i got simply amazed me and made me hype to learn even more. Maybe next step is to learn Kairo :open_mouth:

Fully support this ARC

3 Likes
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I’m the team lead for Warp at Nethermind (Solidity to Cairo transpiler), I spoke to Emilio & Ernesto on Wednesday about our team getting involved. I think we’d be a great fit as we’ve been working with Cairo/StarkNet almost since it’s genesis, and have a deep understanding of both. We also have extensive solidity protocol dev experience.

Really looking forward to this!

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We are a team working on DeFi Pooling on Starknet, and would also love to contribute to the engineering efforts of this project. Are there any estimates on how many resources are required to complete the various stages of the project?

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17

All I want for an L2 is to have a money market (Aave is my preference) and a bridge to other L2s (I like to play hot potato with Ethereum L1). I support this!

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Are there any numbers regarding TVL? I mean a money market like Aave only makes sense if there is something to borrow.
Could you share some information regarding that @Yael-StarkWare.

Thanks in advance

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I fully agree that TVL is important. StarkNet is currently in its alpha version on mainnet, with a canonical bridge being in the final stages of development, so there are no TVL numbers to present yet. There are many potential sources of liquidity for StarkNet. First, users would want to bridge their funds there in order to use DeFi cheaply, and DeFi-Pooling is just one example of that. There are many groups working on AMMs, money market, spot trading, NFT platforms, games, voting, etc, as well as the Maker protocol already developing their code on StarkNet. The second source of funds will be CEXs that allow users to withdraw their funds straight to StarkNet, we have already announced a partnership with Okex and more to come. And the last one would be fiat on-ramp to allow uses to join from the outside. So I believe that in a few months I would be able to answer this question with a signifact number.

4 Likes