We are excited to announce that Aave protocol has successfully integrated with Chainlink to power the Aave oracle network! The Aave oracle network is now live on the Ethereum mainnet and currently securing 16 cryptocurrency price feeds. This represents a major milestone for DeFi, as Aave is the first lending protocol to leverage off-chain pricing data for calculating lending rates using a decentralized network of price oracles.
Aave protocol is a decentralized, open-source, and non-custodial money market protocol. Depositors earn interest by providing liquidity to lending pools, while borrowers can obtain loans by tapping into these pools in both an overcollateralized (perpetually) or undercollateralized (one-block liquidity) fashion. Aave protocol is unique in that it tokenizes deposits as aTokens which accrue interest in real time. It also features access to highly innovative flash loans, which let users borrow instantly and easily; no collateral needed. With 16 different assets, 5 of which are stablecoins, Aave protocol is the most diverse lending pool in the Ethereum ecosystem.
Chainlink is a decentralized oracle network that gives smart contracts secure and reliable access to data providers, web APIs, enterprise systems, cloud providers, IoT devices, payment systems, other blockchains and much more. It features the following:
- Binding service agreements between the oracle providers and querying smart contracts that outline the terms of service
- A robust market of independent oracles providing a range of data and connections
- Flexibility to customize an oracle connection including the number of oracles, types and number of data sources, aggregation strategies, staking deposits, trusted execution environments, Mixicles and more
- A reputation framework for evaluating oracles based on on-chain metrics
It’s an all-in-one network for users to customize how their contract communicates with anything off-chain using varying levels of decentralization, privacy, data aggregation, and oracle selection.
Aave Leveraging Chainlink to Construct its Lending Rate Oracle
To ensure prices reflect real-time conditions, Aave has to take into account the lending rates and/or prices from the leading centralized and decentralized platforms to properly understand the market dynamics at play. These lending rates/prices exist outside the Ethereum blockchain (off-chain), therefore require oracles to bring the data on to the blockchain (on-chain).
It’s not enough to simply connect the data on-chain either; it must be incorporated using a trust minimized oracle framework. Having a single oracle or single data source for obtaining the lending rate introduces a single point of failure that can be exploited. Decentralized applications are only as secure as their weakest feature.
Aave recognized early on the importance of tapping into end-to-end decentralized security as the foundation of trust in an open infrastructure for decentralized finance. This is reflected in our choice to use Chainlink to extend decentralization to our oracle mechanism.
By leveraging Chainlink, Aave uses a decentralized network of independent, Sybil resistant oracles to obtain lending rates/market prices from all the leading platforms. The data is then aggregated together to formulate a weight-adjusted on-chain price that our smart contracts can reference when making loans. No longer will users have to rely on the lending platform itself to maintain accurate off-chain price feeds; a more evolved and trustless approach that Aave is excited to offer the DeFi ecosystem.
Aave is also happy to announce that for the first time LINK holders will be able to use their token as collateral in the Aave Protocol! Check it out and start earning interest on your LINK here.
“Chainlink helped us reduce our time to market, while at the same time providing the highest guarantee of data integrity, decentralization and security. We believe that decentralized oracles are going to be the key for any DeFi platform in the future, and we are proud to be the first open-source decentralized money market protocol to leverage their services. We see the future of DeFi as strictly connected to the ability to bring interchain communication and real-life assets to Ethereum, and this is the direction we want to head with our collaboration with Chainlink.” — Emilio Frangella, Software Engineer at Aave
Ask us anything!
We will be hosting a fireside video chat with our friends at Chainlink on January 15th at 3 pm UTC, so tune in to Chainlink’s youtube channel for the live stream! If you have any questions you’d like to ask us, please join our Discord and post in our “community questions” channel. We’ll try to answer as much as we can in our video!
Check out Aave protocol here!