Proposal: secure 100% of investment in deposits for all markets

Governance New Asset
1

The defi world is currently reserved for geeks, developers, and whales. One of the reasons that can make mass adoption difficult is trust. Without a doubt, we can achieve great confidence if we ensure 100% of the capital invested in deposits.

One suggestion could be, for example, to do something similar to what traditional banking offers. Insure 100% up to a specific amount for example 200k USD, and from here on a variable percentage that depends on the funds blocked in the protocol.

There could be different types of stakers, with different percentages depending on the capital they are insuring.

We could also show before each operation what dynamic percentage from this 200k USD is being secured.

It could undoubtedly be a revolution for AAVE as a differentiator and we could surely receive a great investment from traditional finance.

2

You bring up a good point. If I understand you correctly, your suggestion is for AAVE to offer something protection on deposits up to a certain limit akin to the FDIC guarantee at U.S. banks. Some questions:

  1. Would the protocol insure user capital deposits by minting AAVE and lock them up in some sort of escrow/treasury? If so, there is some sort of precedent if we look to Bancor’s single-sided liquidity pools.

  2. How would such insurance affect AAVE tokenomics, and could it be managed to avoid run away inflation? I suppose AAVE could burn any tokens minted to insure deposits so they remain in the protocol.

  3. Could AAVE charge depositors an insurance premium for such protection?

  4. Could the protocol hedge its insurance risk and generate an ROI that goes back to the protocol or enhances interest rates paid to depositors?

Perhaps a pilot with USDC or DAI would be worth a shot.

3

1-2. I don’t know which would be the best option. Perhaps I was thinking more about for example an opposing party, for example if you deposit 1000 USD on another party there would be someone who would insure that 1000 USD and who would receive a%.

3.This could also be an option. Before the deposit you could choose the option that you like the most.

  1. It seems clear that the% would decrease but a new product would be opened, for a client further removed from the crypto world or with a more conservative profile.

It would be a good option to do it first as you say with a stable coin.