99.8% Back Aave’s Centralized Lending Shift on Kraken’s Ink

• Aave community overwhelmingly approves centralized lending platform on Kraken’s Ink blockchain.
• Hybrid model aims to merge DeFi technology with institutional regulatory compliance.

On July 2, 2024, CoinDesk reported that Aave, a leading decentralized finance (DeFi) protocol, voted to explore launching a centralized version of its lending platform on Kraken’s Ink blockchain. The decision follows a Snapshot temperature check vote, where 99.8% of community members supported the move. The initiative combines Aave’s battle-tested DeFi technology with the regulatory-friendly framework of a centralized structure, which aims to pave the way for institutional adoption. The next step is for an Aave Request for Comment (ARFC) to be drafted, followed by a potential on-chain Aave Improvement Proposal (AIP) for community approval.

The proposed platform will deploy a whitelabel version of Aave V3. Aave will license this version to the Ink Foundation, the entity managing Kraken’s Layer 2 blockchain, which was built using Polygon's Chain Development Kit (CDK). Designed to bridge centralized exchanges with DeFi, Ink caters to institutional users by prioritizing compliance and accessibility. This collaboration aligns with Aave’s strategy to diversify revenue streams and increase its footprint in institutional lending. As a result, the Aave DAO will receive 20% of the platform's net revenue.

To drive adoption, the Ink Foundation has pledged up to $250,000 for audits and will also reserve a portion of its forthcoming INK governance token supply to fuel platform activity. In addition, Aave will support these efforts by providing AAVE tokens and its GHO stablecoin. An exclusivity agreement between Aave and the Ink Foundation will make this the sole lending solution on Ink for the first two years, a strategy that aims to solidify its early growth.

Despite widespread approval, the centralized governance structure has raised questions within Aave’s community about decentralization, as the Ink Foundation will entirely oversee the platform. Additionally, Ink’s relatively low total value locked (TVL) compared to competing Layer 2 solutions highlights potential challenges. Nonetheless, the partnership presents clear synergies: Ink gains a signature product to boost its ecosystem, Kraken strengthens its institutional DeFi offerings, and Aave expands into an untapped market.

According to CoinMarketCap, Aave (AAVE) is trading at $92.35 as of 15:17 UTC on July 2, reflecting a 1.59% decrease in 24-hour price.