Why isn’t this a thing? It would bring free extra volume to aave, be more in line with the crypto ethos, and redirect the discussion on this board to actually improving the base functionality of the platform instead of mostly being “pls list x token next”.
As an example of how these two approaches differ, Uniswap (permissionless listing dex) vs Kyber (permissioned listing dex). Just 9 months ago they had similar volume. Now, Uniswap is about 400x the daily volume of Kyber.
As for regulations, this would also decentralize power from the team, which would make aave less of a potential security if the cftc’s Tabert is to be believed “The more decentralized it becomes over time and the more that it effectively runs itself, the more likely it is it’s going to fall within the commodity category and not the securities“
Because Aave operates in a different framework of risk, it has to be very cautious about new additions. Each asset has to have established appropriate levels of liquidity, diminished smart contract risk and so on. We must strive to keep a healthy money market, otherwise the volatility and the liquidations on much riskier assets will hinder stability and drive users away. We all know by now that crypto is full of people who undermine risks, just look at EMN debacle in Yearn’s case. It is better to restrict their ability to borrow and collateralize all the crap assets out there, since in the end they come back crying and suing the team and the community building the protocol, while being completely devout of responsibility over their own ignorant actions.
EMN case was meant to emphasize that there are plenty of users who do not care about risk and if Aave provides them with risky options to borrow and collateralize, they will do it. When things go bad inevitably, they will be the loudest to complain and tarnish Aave’s reputation in the space.
I think if you open it up, you actually put users at risk for highly volitile liquidation positions. Dex utility within uniswap is perfect for your use case described. I would say leave it to uniswap. What value would that really bring to AAVE, besides risk and garbage?
Would you describe food tokens on Uniswap to be “highly volatile” positions? Not really any difference between getting a RUG token on uniswap or aRUG token that both go to zero. If the people crying about getting SAFE, YAM, Sushi from uniswap didn’t hurt uniswap, why would that aspect hurt aave?
If you are concerned about low liquidity, we can keep the approved token list with manual loan parameters.
But there can also be an “unapproved token” section. With these tokens , when or if it comes time to liquidation there are multiple ways around that for unapproved tokens that would be unique to them:
1.much lower maximum loan to value ratio,
2.much higher interest rate spread between borrowing and lending (which would be immediately sold into eth/stablecoin and go into an aave safety pool for that token in case of shortfall),
3. paying a percentage of face value fee in stablecoin/eth on loan origination to further bolster the shortfall fund,
4. Limit on the total amount of an unapproved coin can be deposited as collateral in total
5. On the payback of the loan, funds from 2 and 3 rewarded to aave stakers.
All of these algorithmically scaled by market cap data from chainlink. Probably many more that I didn’t think of.
This would be great to have in that I could borrow / lend whatever token-de-jour I wanted. But…
IMO, the solidity of the entire Aave platform centers around getting the risk parameters for each token correct – see their Risk Assessment framework.
There would need to be some automated way of having a smart contract make those risk assessments; which seem to require much more human consideration than a mere mathematical measurement. Getting those values wrong could easily lead to someone borrowing and running away, leaving worthless collateral – which would directly impact AAVE holders via the safety module.
I think the only way the Aave team could speed things up is by crowdsourcing the debate about new tokens – which is one of the core jobs the new governance system seems designed for.