Deploy Aave V3 on BNB Chain

BNB is one of the most used chains with an active and loyal community of users. At the writing of this proposal, BNB Chain had 1M DAU and an average of 2.5M to 3M transactions per day during October. Although BNB Chain is known for its strength in the GameFi vertical, it also has a vibrant DeFi ecosystem. A TVL of ~$7B makes BNB the second-largest chain by TVL.

The DeFi ecosystem is led by PancakeSwap, the third DEX with the highest TVL ($4B) across chains and also has one of the highest volumes. Other dexes like BiSwap, DODO, or iZumi also have a relevant role in the ecosystem. Today Venus is the most important BNB lending project with about $700M in TVL. Liquid staking, derivatives – be they options or perpetuals – or nascent categories like Real Word Assets are also present on the chain. The trading volume of BNB DeFi dapps is also among the highest across chains. But above all, they have a large mass of users behind them.

BNB Chain wants both to further diversify the DeFi options available to its users and also bring new approaches. AAVE is one of the flagship DeFi projects and holds a leading position in the crypto debt markets, standing out as a valuable addition to our ecosystem. Furthermore, the v3 adds an extra degree of innovation, capital efficiency, and security and leaves a lot of room to be leveraged by other projects. Additionally, AAVE is one of the most mature projects out there and its model has been successfully tested over time. All these factors have motivated us to come up with this proposal, as we believe that the project would help the ecosystem grow further.

A brief summary about us:
BNB Chain is a decentralized Layer 1 EVM compatible that uses Proof of Staked Authority (PoSA) as a consensus mechanism. At the time of writing, it has 26 active validators and 47 candidates and is looking forward to increasing this number in the short future to strengthen its decentralization. BNB Chain comprises BNB Beacon Chain (previously Binance Chain) and BNB Smart Chain (previously Binance Smart Chain). The combination of these factors lets the chain support short block time and lower fees.

Regarding its infrastructure, Chainlink and The Graph fully support BNB. Nodereal, Ankr, InfStones, Quicknode, and Chainstack are the public RPCs and BSC Scan is the reference token tracker of the network.

For the deployment itself, we believe that the following list of assets would be the ideal starting collateral on Aave V3: BNB, WBTC, WETH, CAKE, BUSD, USDC, and USDT. These coins are assets of great quality and represent best the BNB DeFi offering. They also have a solid demand, all of them have a transfer volume (30d) of more than $2,000M and are supported by Chainlink’s price feeds in the main DEXs (PancakeSwap, BiSwap, MDex, iZumi or DODO).

To guarantee the successful landing of AAVE, BNB Chain is open to articulating together with the AAVE team the best strategy to encourage not just liquidity but also bootstrapping users and integrations with other projects. We also encourage forum participants to propose possible strategies or recommendations in this regard.

We also want to address the security of BNB, one of the chain’s top priorities. We actively audit the network and its smart contracts with different security providers. Some of the audits have been performed by PeckShield, VeriChain, CertiK, or Quantstamp and their results are publicly available.

A deployment of AAVE on BNB will be definitely positive for the chain. We also believe that it would also be beneficial for AAVE. AAVE would have access to the chain with the highest number of active users and transactions, the second largest TVL of DeFi, as well as exposure to a vibrant DeFi ecosystem with many possible ways to leverage its product. This will have a positive impact on the DAO’s treasury, generating a new source of revenues that, based on the weight of BNB in DeFi across chains, has the potential to become one of the most relevant for AAVE.

We hope that this proposal will be well received by the AAVE community and that it will be able to generate an enriching debate prior to going through governance. The BNB team remains at the disposal of both the AAVE team and its community to discuss this proposal as well as to streamline the collaboration between both entities in the event that the AAVE community decides to push it forward.

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@AdamBNB Thanks for the proposal.

The proposal itself is an interesting one and I expect to see debate on this proposal on whether this is a good idea for the Aave Community or not. The proposal does a good job of arguing why BNB chain needs the Aave Protocol but misses what benefits the Aave DAO would receive (increased revenue, etc).

By launching Aave V3 on any new chain there is a reputational risk for the protocol, and we can see what damage was caused by the Harmony exploit. In my opinion, the Aave community should be cautious about proceeding with BNB chain as in the past criticisms (BSC) have followed it around since its inception.

@AdamBNB I believe that BNB should start the discussion around strategies to boostrap liquidity as this will help the Aave community understand the rewards/upside to the Aave DAO vs the risks.

As with other recent V3 deployments, I would be highly against any AAVE LM’s for this market, if it were to be approved and believe that BNB should incentives and boostrap the market.

In general, I am opposed to the proposal as I believe the risks currently outweigh the reward for the community and would need to be convinced otherwise.

Look forward to your feedback.

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Thank you for your message and for kickstarting the discussion!

We are much looking forward to a constructive debate around how this deployment could best benefit both communities and also to address all questions from the Aave community.

About this part, the biggest immediate value we see is considerably increasing the revenue of the DAO.

If with the support of the community, this proposal is accepted we are forecasting that BNB Chain would become the second-highest TVL for AAVE by end of Q1 2023.

As we detailed in our intro our DeFi ecosystem is vibrant and 2nd largest by TVL, on the other hand, AAVE v3 would bring one of the highest capital efficiency for a lending protocol, strong security, isolated mode, etc. These are all features sought by our community!

Additionally, the BNB Chain foundation will also be strongly dedicated to making this partnership a mutual success.

Last but not least, one of the newest additions to the v3 is multichain portals. Through this partnership, the different Aave markets could access BNB liquidity, with a corresponding positive impact on the DAO. BNB has been one of the tokens that have remained fairly strong during the market downtrend, which makes it an interesting asset to be deposited as collateral. Aave would have access to this asset with an eventual deployment in BNB. We could also mention that our chain has a considerable volume of bridged assets that could (and will surely) be attracted by Aave.

Your concern is legit.

The way I would like to address it is while it is hard to foresee where and when the next big exploit will happen, the BNB Chain has remained secure, and even when an exploit occurs 100% of users founds remained safe. Based on that last comment, we could agree that BNB Chain would be one of the safest chains for AAVE users’.

You can be certain that reputational risk is at least as important for us as it is for you.

Regarding liquidity incentives, as we have described in the proposal, BNB Chain is willing to find – together with the Dao – the best way to encourage liquidity.

This indeed could be in the form of a liquidity mining package, but also by running specific campaigns or initiatives. We will also be supporting in finding multiple relevant synergies within our ecosystem.

About AAVE LM’s support it is not something critical for us either.

We are looking for a long and mutually fruitful partnership. For that reason, we are mostly looking for steady organic growth, not “mercenary capital” only attracted by temporary incentives.
This capital will later leave the chain and probably also Aave, which is not the outcome we are looking for.

To conclude, I hope that we manage to answer your question and we are definitely looking for the AAVE community support including yours.

It is always worth mentioning that while the risks of these partnerships are fairly limited, nothing will prevent the community to vote for a proposal to terminate this partnership shall the results disappoint.

But once again, you can be ensured that we will put all our might and power into making it a mutual success!

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Hello

Additional question : Can you implement an offer for Aavegotchi ?

BNB Chain has a vertical in GameFi.

Hello @Machinal

A partnership with Aavegotchi could be cool, but (correct me if I’m wrong) I do not think we need to go through governance for this partnership!

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I want to add a few figures to my colleague Adam’s explanation. As he has well explained, BNB Chain is the second largest chain by TVL, TVL that the DAO can capture if the chain users and other projects find the v3 offering attractive. But let’s add a little more light to that figure. BNB Chain’s TVL market share has been steadily growing since May. On May 15, the BNB market share was 8.6%. Today it is close to 13%.

During the last months, the TVL market share of the chain has shortened its distance from Ethereum and seems to distance itself from the other major blockchains. Even in the current market conditions, we are witnessing good growth of both builders and capital. We believe that this shows trust and recognition by market participants. It also hints at the organic growth that the chain has experienced and that we continue to enhance. During this time initiatives such as liquid staking, with the landing of three different players competing to capture the largest BNB and market share possible, have attracted significant capital. Generating fees, demand, and public exposure for these projects.

Competition is good for the ecosystem and BNB Chain’s market position makes it possible for various market players to compete while generating enough fees. If we look at the composition of the TVL of BNB, the weight of lending (in %) still has room to grow. In September, lending represented around 12% of the TVL. Due to the importance of debt markets, any player jumping into this market can play a significant role in increasing this percentage. Therefore, in responding to user concerns that have been raised in the forum, AAVE’s DAO could greatly benefit from the market opportunity presented to them in BNB. In addition to this, from the BNB Chain team, we will do everything possible (LM Program, generating synergies within the ecosystem, joint marketing, and other initiatives) to help achieve what we believe will be a common success.

Hi @AdamBNB,

Thank you for your detailed response to my post. + @Rafael for the figures provided.

I still raise the Risk vs Reward discussion. The Harmony Hack has negatively impacted the Aave Community and today is still actively discussed on how to rescue funds. You mentioned:

The above statement is meaningless unless BNB is willing to put this part of the proposal that they will backstop if an exploit takes place.

By deploying Aave onto a new chain, the DAO has to occur additional costs for Risk Management + Development costs (See recent proposals by Llama, Chaos Labs, BGD, Gauntlet) and that’s why such topics like LM are important as it can drive revenues to pay for such contributors in the future.

I believe the introduction of the new model, which would be a first for the Aave DAO could be Protocol Owned Liquidity. BNB, in discussion with the community, could part of their proposal donate “X” amount of tokens (BUSD, BNB, USDC) to the Aave DAO. These tokens then are used to bootstrap liquidity to the market as well as pay for contributors to the DAO to perform risk/development efforts for BNB for X years.

The above would be a huge benefit to the Aave DAO as it helps strengthen the Aave Treasury and can fund the Aave contributors for the coming months/years. At the time same time, it benefits BNB as liquidity is provided early on in the launch of the chain and can help bootstrap growth quickly. Most importantly, it shows BNB’s commitment to making the Aave Ecosystem a success not only on BNB but on all other chains.

With regards to LM, only BNB can decide what that can be. As you’ve seen, there has been very little engagement on this post. Maybe an estimated figure of LM might attract some attention here.

I’m still not convinced.

Look forward to your response.

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Hello,

Quick update from our end.
Putting in place a LM plan, we will publish it and collect feedback before moving to the snapshot phase.

Need a couple of days more, hopefully sharing it this week!

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