[TEMP CHECK] Aave and ether.fi Cash: A Proposal for Real-World Utility
Author: ACI & Ether.fi
Date: 2025-04-15
Overview
This proposal outlines a partnership between Aave and ether.fi, with the goal of creating a unique Aave market on an EVM L2 to facilitate on-chain credit for everyday payments through the ether.fi Cash credit card program. This collaboration aims to benefit both platforms by continuing to expand their user bases and driving innovation in DeFi with a focus on bridging the gap between DeFi and real-world consumer applications.
Summary
The ether.fi market was launched on Aave back in September, with the goal of laying the groundwork for a unique instance of Aave, focused at stablecoin borrowing against interest accruing collateral. This market has since been idle, while the development of ether.fi Cash continued to take shape.
As we prepare for the next phase of the rollout plan, we propose migration of this market to an optimized Layer 2 market designed specifically for consumer credit applications. Since then, it was determined that ether.fi needs a more tailored instance of the Aave market, with the focus of allowing for more flexibility in asset listings and parameters, along with less expensive transaction fees. This market will feature tailored parameters and asset listings optimized for real-world spending, supported by a competitive card program offering up to 3% cashback.
Motivation
The traditional credit card industry continues to charge excessive interest rates (often 20%+). By leveraging collateral assets that permit users to continuously earn interest on the positions held in their wallets, naturally offsetting borrowing costs. This market will create a virtuous cycle where a user’s digital assets work to pay down their credit. With this, we can provide users with:
- Significantly lower borrowing costs compared to traditional credit cards
- Competitive rewards (up to 3% cashback)
- Efficient use of interest bearing asset positions as collateral, allowing users to keep their positions on chain and in their own custody
- Minimal transaction costs through L2 deployment
This proposal continues to build on the fundamental differences that DeFi has to offer. The future of ether.fi cash will be a system that provides both retail and corporate users with a truly native on-chain solution that does not sacrifice any of the features that consumers have become accustomed to with everyday spending.
Card Program
The ether.fi Cash credit card is set to change everyday spending by bringing self custodied DeFi-powered credit to the world’s largest payment network. With universal acceptance at over 80 million merchants globally, users can access their DeFi credit lines for daily purchases while earning cashback rewards on all expenditures. The upcoming neo-banking alternative mobile app, launching in early Q2 2025, will evolve to provide a comprehensive suite of financial tools including real-time transaction monitoring, expense categorization, budget tracking, and intelligent position management. Corporates and retail users can instantly create multiple virtual cards, manage spending limits, and track rewards - all while their collateral works for them in the background through the Aave market. The app would integrate directly with the custom Aave instance, offering automated position management, smart liquidation protection, and dynamic credit line adjustments based on collateral value. Capital efficiency in this market will be further realized with the launch of Aave V4, utilizing available stable liquidity through the hub and spoke model.
By Q4, the platform plans to incorporate AI-powered trading strategies and financial insights, along with predictive budgeting tools, completing the vision of a truly on-chain banking alternative experience powered by DeFi. This will allow for a complete reimagining of on-chain credit, where the efficiency of DeFi meets the convenience of traditional payment networks, all optimized through a dedicated L2 deployment for minimal transaction costs. This vision will be coupled with the battle tested Aave market, along with risk monitoring provided by Chaos Labs.
Through this vision, ether.fi would also look to collaborate with Aave to offer a unique co-branded credit card for a unique set of users.
Implementation details & profit share
We believe in strategic partnerships that are built for sustainable growth and fair value distribution. That’s why we’re proposing a straightforward revenue sharing model where 15% of the interest rate spread goes directly to the Aave DAO. This creates a win-win scenario where protocol growth directly benefits both ecosystems.
- For the initial 6 months, 20% of the interest rate spread allocated to Aave DAO
- After the initial 6 months, 15% of the interest rate spread allocated to Aave DAO
- Transparent revenue distribution mechanism
- Quarterly reporting on market performance and revenue generation
This will allow for scalable infrastructure that is ready for mass adoption.
Implementation Timeline
- Q2 2025: L2 market deployment with defined assets supported
- Early Q2 2025: Card program launch to public (currently in closed beta)
- Q3 2025: Enhanced features rollout
- Q4 2025: Program optimization based on usage data
Disclaimer
This proposal is powered by Skywards. ACI is not directly affiliated with ether.fi and did not receive compensation for creating this proposal.
Next Steps
- If consensus is reached on this [TEMP CHECK], escalate this proposal to the Snapshot stage.
- If the Snapshot outcome is YAE, this proposal will be escalated to ARFC stage
- Publication of a standard ARFC, collect community & service providers feedback before escalating proposal to ARFC snapshot stage
- If the ARFC snapshot outcome is YAE, publish an AIP vote for final confirmation and enforcement of the proposal
Copyright
Copyright and related rights waived under CC0