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

@Techa, this matter is related to blockchain technology and the development of a centralized lending protocol on Kraken's Ink blockchain, so I’m assigning it to you.

Key event: Aave has proposed launching a centralized version of its lending protocol on Kraken’s Ink blockchain, a compliant layer-2 platform for institutional DeFi and tokenized assets. The proposal, approved through an initial community vote, aims to boost Aave's institutional lending influence and generate new revenue streams. Next steps include drafting an onchain Aave Improvement Proposal (AIP).

Of course, I can provide an update on the proposal for Aave to launch a centralized version of its lending protocol on Kraken's Ink blockchain. It's an interesting development that merges the worlds of decentralized and centralized finance.

An initial off-chain vote, known as an Aave Request for Comment (ARFC), has concluded with overwhelming approval from the Aave community, with 99.8% of votes in favor. This signals strong support for licensing a version of the Aave V3 codebase to the Ink Foundation, the entity behind Kraken's Ink blockchain. The next step in the process is to draft a formal Aave Improvement Proposal (AIP) that will be voted on-chain.

This collaboration is positioned as a strategic move for Aave to expand its footprint in the institutional lending market and to generate new revenue streams. The Aave DAO is set to receive a portion of the revenue generated from the platform, which will be equivalent to or greater than a 5% reserve factor based on the borrowing volume across all pools.

About Kraken's Ink Blockchain

Kraken launched its Layer 2 blockchain, Ink, in late 2024. It's built on the OP Stack, which is part of the Optimism Superchain, and aims to provide a bridge between centralized exchanges and the DeFi ecosystem. Ink is designed to be a compliant platform tailored for institutional DeFi and tokenized assets. The goal is to offer a more user-friendly on-ramp to DeFi, backed by the credibility of a major exchange like Kraken.

The Centralized Approach

The proposed lending platform on Ink will be a "whitelabel" version of Aave V3, meaning it will use Aave's core technology but operate under a different brand and be centrally managed by the Ink Foundation. This centralized governance model is a key aspect of the proposal and a departure from Aave's decentralized nature.

This hybrid model aims to offer the best of both worlds: the robust, "battle-tested" infrastructure of Aave combined with a more controlled and regulatory-friendly environment that is expected to attract institutional investors.

Incentives and Exclusivity

To encourage initial liquidity, the Ink Foundation has committed to significant incentives, including liquidity mining programs expected to bring in over $250 million in early supply. They are also allocating 4% of the future INK governance token supply for bootstrapping incentives. Additionally, the Aave DAO will contribute AAVE tokens and its GHO stablecoin as further incentives.

As part of the agreement, the Ink Foundation will exclusively feature this Aave-powered platform as its on-chain lending solution for at least the first 12 months after deployment.

Potential Considerations

While the proposal has seen strong support, there are some points of discussion within the community. The primary one revolves around the trade-offs of decentralization, given the centralized control the Ink Foundation will have over the new platform.

Despite being a major DeFi protocol, Aave's new venture on Ink has the challenge of attracting significant assets to a relatively new Layer 2 blockchain. Data shows that Ink's total value locked is still modest compared to more established Layer 2 solutions.

The partnership is seen as a potential win-win: Aave can diversify its revenue and expand its technology's reach, while Ink gains a flagship application to grow its ecosystem, and Kraken can offer its users a reliable DeFi-backed lending service.

Techa, focus your article on clearly explaining the key event: the Aave community's overwhelming approval (99.8%) for a proposal to bring a centralized version of its V3 lending protocol to Kraken's Ink blockchain. Start by detailing how this partnership blends DeFi with a more centralized, regulatory-friendly model, emphasizing strategic goals like expanding into institutional lending and generating new revenue streams for Aave's DAO. Avoid rehashing background—briefly introduce Ink’s compliance focus and its positioning as a Layer 2 blockchain—and center the narrative on why this move matters (e.g., Aave's hybrid approach, exclusivity, and incentives). Close by acknowledging potential concerns about centralization to provide a balanced perspective. Keep it sharp and fact-driven.

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 21, 2025, CoinDesk reported that Aave, a leading decentralized finance (DeFi) protocol, is set to launch a centralized version of its lending platform on Kraken’s Ink blockchain. This decision follows an Aave Request for Comment (ARFC) 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, paving the way for institutional adoption. To finalize the process, an on-chain Aave Improvement Proposal (AIP) will be drafted for community approval.

The proposed platform will deploy a "whitelabel" version of Aave V3, licensed to the Ink Foundation—the entity managing Kraken’s Layer 2 blockchain, which is built on Optimism’s OP Stack. 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. The Aave DAO will receive a share of platform-generated revenues, at a minimum rate equal to a 5% reserve factor based on borrowing volumes.

Incentives play a key role in driving adoption. The Ink Foundation has pledged over $250 million in initial liquidity mining rewards, alongside reserving 4% of its forthcoming INK governance token supply to fuel activity. Aave will further support these efforts by providing AAVE tokens and its GHO stablecoin. The exclusivity agreement between Aave and the Ink Foundation—making this platform the sole lending solution on Ink for the first year—aims to solidify its growth trajectory early on.

Despite widespread approval, the centralized governance structure has raised questions about decentralization trade-offs within Aave’s community, 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.

As of July 21, 2025, 15:17 UTC, Aave (AAVE) is trading at $333.39, reflecting a 1.59% rise in 24-hour trading volume, according to CoinMarketCap.