New DeFi gameplay: Aave is listed on AMM Market, which can use Uniswap and Balancer LP tokens as collateralsteemCreated with Sketch.

in CryptoDog4 years ago

The Aave protocol is a decentralized liquidity protocol that allows users to release the liquidity of various assets in a multi-pool method. The new AMM liquidity pool released this time enables Uniswap and Balancer's liquidity providers ("LP") to use their LP tokens as collateral in the Aave protocol.

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The rise of AMM

With the rise of Uniswap in 2018 and the emergence of "automatic market makers" (AMM) in the DeFi ecosystem, users of Ethereum can now exchange assets without the need for a centralized third-party intermediary. Users can also earn fees by providing liquidity.

How does LP token work?

By providing liquidity, users can automatically obtain LP tokens from AMM. In most cases, LP tokens represent the user's encrypted assets deposited in AMM and the proportion of transaction fees charged over time in the specific liquidity pool where the user deposits assets. (Usually, LP tokens represent a 50/50 ratio between ETH and another encrypted asset, making its potential volatility lower than its underlying assets.) Because LP tokens usually remain in the liquidity pool of user assets Transaction fees are generated within time, so LP tokens may also accumulate value over time.

AMM was the first method of passively earning income in the DeFi ecosystem, and it remains the same today.

First successful proof of concept

Last year, the Aave protocol developed the "AMM Liquidity Pool" proof of concept through the "Aave Uniswap V1 Market", which allows users to deposit Uniswap v1 LP tokens into the Aave protocol and use them as collateral. In view of the community's interest in this pool, users can now use LP tokens from multiple AMMs, make proposals and participate in Aave Governance decisions, and decide which AMM protocols and mortgages can be added.

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Multi-market approach

AMM Market is the first of Aave's many markets on Ethereum and potentially on different networks, enabling the community to explore "new areas" with Aave.

Start collateral and agreement support phase 1:

Today, Aave users can deposit LP tokens from Uniswap v2 and Balancer.

Uniswap is the center of gravity of the AMM protocol. Its robust, simple code and innovative model inspire participants across multiple blockchains. Uniswap has a large daily trading volume and 4 billion US dollars of liquidity. The following Uniswap V2 LP tokens are currently supported:

  • DAI / USDC
  • WBTC/USDC
  • DAI / WETH
  • USDC / WETH
  • AAVE / WETH
  • LINK / WETH
  • BAT / WETH
  • SNX / WETH
  • UNI / WETH
  • YFI / WETH
  • CRV / WETH
  • MKR / WETH
  • REN/WETH
  • WBTC / WETH

Balancer is one of the most innovative AMMs in the ecosystem. Their smart pool system breaks the status quo of the 50/50 ratio and allows the use of more complex liquidity pools. There is a significant synergy between Balancer and Aave protocol. Balancer co-hosts the art of protecting the Aave security module of the Aave liquidity provider.

In addition, based on the smart pool architecture, Balancer LP token holders will continue to receive BAL rewards every week. The following Balancer LP tokens (BPT) are supported:

  • WBTC/WETH
  • BAL/WETH

At this time, users who deposit LP tokens can borrow the following encrypted assets: DAI, USDC, ETH, wBTC, and USDT. Users who deposit DAI, USDC, ETH and wBTC can borrow tokens.

In order to accurately estimate the value of Uniswap and Balancer's LP tokens, the Aave protocol utilizes Chainlink's decentralized oracle service. ConsenSys Diligence has reviewed the smart contract used to calculate the value of LP tokens.

Start collateral and agreement support phase 2:

As mentioned above, over time, it is possible to deploy more AMM liquidity pools, especially according to Aave Governance's proposal-such pools will be deployed in the second phase (coming soon). AMM's liquidity pool will be fully released to Aave Governance in the short term.

At launch, the Aave security module will not cover AMM liquidity pools, but Aave governance can decide to include these pools through the AIP process.

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