Strategic Investors 3 Arrows Capital & Framework Ventures Take $3m Position in $LEND to Accelerate Growth of the Aave Protocol

Isa Kivlighan
Jul 15, 2020 · 4 min read

Decentralized money markets with token-incentivized liquidity represent an inflection point for DeFi and blockchain networks. Currently $2B+ of assets are locked in DeFi today, up from $400M a year ago. We expect the total addressable market to grow several orders of magnitude in the next 5 years with several money market platform winners. This transition is already underway as assets leave centralized borrow & lending platforms. Next, it will be blockchain businesses seeking working capital who will leverage these platforms and provide their assets. Finally, it will be traditional financial institutions moving assets on-chain as they seek higher risk-adjusted yields.

In order to hypercharge this transition, Aave is excited to announce that Framework Ventures and Three Arrows Capital have taken a $3M position on $LEND when the $LEND token was $10cts and now hold over $7M worth of $LEND tokens. This strategic investment aims to further Aave’s mission of enabling global, permissionless tokenized assets money markets. Both firms will be active market participants in the Aave ecosystem via staking and governance.

Framework Ventures is one of the most active investors and liquidity providers in the DeFi ecosystem.

Three Arrows Capital is one of the largest market participants in the OTC lending market.

With their hands-on experience in the DeFi and institutional markets, both Framework and Three Arrows are uniquely positioned to help fuel Aave’s growth as investors and major users of the protocol. Aave is excited to work closely with Framework and Three Arrows as we move into our next phase of growth.

“Aave Protocol has grown substantially since the beginning of the year when we launched. Our focus has always been innovation and diligent risk management, which has got the attention of Framework Ventures and Three Arrows Capital. Their involvement will bring substantial expertise to scale the protocol for institutional usage and they will be helpful stakeholders within our community.” — Stani Kulechov, Aave

Aave’s Path to Decentralization & Growth

Both firms plan to work directly with the Aave Protocol to guide its path towards decentralization.

1. New Token Economics

Both firms contributed feedback to Aave’s new token economic model for LEND. Staking, liquidity providing rewards and a new smart contract are all part of the plan for the new token model after the migration from $LEND to $AAVE.

2. Protocol Governance

Both firms will actively engage in protocol governance by submitting & voting on Aave Improvement Proposals (AIPs) around protocol, risk and market-specific policies.

3. Market Access & Depth

Both firms plan to shift existing OTC borrow / lend activity to help grow assets on the Aave platform while also helping increase market depth for larger institutional players who require deeper pools of liquidity.

In addition, the introduction of Credit Delegation, an innovative DeFi building block, meaningfully expands Aave’s reach into traditional financial markets.

4. Insurance Fund

As a part of Aave’s new tokenomics, both firms are excited to participate in insurance fund staking to bolster the strength of the protocol, providing a backstop mechanism in the event of any protocol deficits.

The insurance fund will be built on top of existing AMM technologies. An 80% AAVE / 20% ETH liquidity pool using Balancer will be created, providing additional benefits in terms of market depth for the AAVE token, earnings for users locking AAVE in the form of BAL tokens and trading fees, on top of AAVE token incentives and protocol fees.

With the ability of contributing to the insurance fund by locking AAVE and contributing liquidity into an AMM, stakers create a trustless and decentralized market with deep liquidity to allow trading AAVE against ETH.

A sufficiently collateralized insurance fund will also mitigate risk for protocol users.

About Framework Ventures

Framework Ventures is a thesis-driven venture firm, and one of the most active investors & liquidity providers across the DeFi ecosystem.

“We believe there will be a significant market shift of private borrow/lend activity moving to decentralized money market protocols. Aave stands to significantly benefit from this underlying shift by enabling more assets as collateral, continuing to innovate with new lending features such as credit delegation and partnering with other DeFi protocols, ultimately fostering a community-first approach.” — Michael Anderson, Framework Ventures

About Three Arrows Capital

Three Arrows Capital is a hedge fund founded in 2012 by Su Zhu and Kyle Davies. The firm focuses on digital asset trading and principal investments.

“DeFi is strongest when it is built by the community for the community with pragmatism and composability. We have been impressed by Aave and are excited to bring our knowledge of the institutional borrow and lending space to work on further growing the decentralized money markets at Aave.” — Three Arrows Capital

Aave Blog

Headquartered in London, Aave is made out of a team of…

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