Bringing RWAs On-Chain Is Biggest Opportunity For DeFi Says Aave Founder

Bringing traditional financial assets on-chain may be the biggest opportunity for decentralized finance (DeFi), according to Aave founder Stani Kulechov.

Speaking during a fireside discussion titled “Stablecoins, RWAs, and the Upcoming Launch of AAVE V4” at the Proof of Talk conference in Paris on June 11, Kulechov mentioned the biggest opportunity for DeFi growth will be real-world assets (RWAs) and bringing traditional financial assets on-chain.

“Users will then be able to use Aave agnostically for these assets,” Kulechov stated.

Kulechov added that the DeFi lending protocol Aave ($AAVE) is approaching this concept via the deployment of “Horizon.” This is an Aave market where users can access permissioned RWAs to borrow against permissionless stablecoin liquidity. Horizon aims to enhance the integration of RWAs into DeFi.

TradFi Value On-Chain Will Drive DeFi

Kulechov elaborated that the opportunity for DeFi will grow as traditional financial systems bring value on-chain. He explained this is likely the case based on instances seen in TradFi.

“A lot of yield in TradFi is driven by the central bank economic party, but at some point these rates will go down,” he said. “When this opportunity drops, the opportunity for DeFi increases, making DeFi the best place for all financial opportunities globally.”

Kulechov further remarked that RWAs are a critical part of expanding this growth. “We must have RWAs to borrow against – we can then create interest rate markets and let anyone tap into that market.”

Challenges To Consider

While the concept of integrating RWAs into DeFi is relatively new, Kulechov pointed out that BlackRock’s tokenized fund, BUIDL has been driving a lot of excitement around these use cases.

While notable, he warned that the biggest challenge for organizations launching tokenized funds is understanding the specific use cases.

“We need to think about the use cases of selling traditional financial assets to crypto audiences,” Kulechov remarked.

Aave V4 Updates

In addition to discussing the importance of tokenized RWAs, Kulechov touched on Aave V4, which the lending platform introduced in 2024.

“Aave V3 has more than $40 billion in total value locked in net deposits and we are currently working hard on V4,” he said.

While Kulechov couldn’t provide an exact launch date, he did explain the importance behind the upgrade.

“Aave wants to empower user innovation to enable increased liquidity,” he said.

For instance, Kulechov shared that Aave V4 will introduce a new type of architecture with a deep focus on Spokes, the Liquidity Hub, and the Liquidity Premiums. He explained that the Liquidity Hubs are where liquidity is stored, while Spokes is an integration allowing users to easily enter into the protocol.

“This means if a user has a new type of innovation, they can request liquidity from the hub and immediately access that,” he explained. “Any type of new innovation will see direct effects of the Aave protocol and deep liquidity, but also that liquidity doesn’t have to be incentivized with rewards because users can now get direct access to the whole liquidity pool,” he stated.

The reason behind this is to drive different innovations being utilized on Aave without segregating liquidity network effects.

“This is a really unique value proposition for new use cases coming on-chain like RWAs,” he stated.

Moreover, Kulechov noted that while V4 is yet to launch, anyone is welcome to currently expand and add to the protocol.

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