Aave Labs buys Avon to launch fixed-rate lending on its protocol

Aave switches to the price known in advance. Friday November 6, Aave Labs, which develops the decentralized lending protocol Aave, announced the acquisition of the startup Avon. It builds fixed rate credit tools. The recruited team will build this brick, while version 4 of the protocol, in preparation, must accommodate more varied credit structures.

The key points of this article:

Aave Labs acquires the technology and team of Avon, a startup specializing in fixed-rate lending.

Aave Labs did not reveal the amount of the operation, announced Friday November 6 to The Block.

Three members of Avon, including founder Prince Sinha, join the Aave Labs teams.

Aave calls itself the largest onchain lending network, with deposits exceeding $30 billion.

A complete technical stack, at an unknown price

The press release, published on X, describes an overall operation which leaves little to chance. Aave Labs absorbs the entire technical stack of the startup. Avon sells its fixed rate and variable rate loan protocols.

Also leaving are the onchain order book, domain names and associated assets. Aave Labs did not disclose the amount of the transaction.

Three employees are making the trip. Founder Prince Sinha and Ayush Kaul join the engineering team, while Omar el-Ashaal takes a role in business development.

Avon, founded by Prince Sinha, had built fixed-rate and variable-rate lending markets, as well as an order book designed for new onchain credit structures.

Its trademark remains a so-called “segmented risk” approach. The book compares credit offers and requests in real time, confining the risk to each loan strategy.

For Stani Kulechov, director of Aave Labs, fixed rates are part of the financial products that users already use. This acquisition should help the network reach institutions, fintechs and individuals.

Why does the fixed rate appeal to institutional investors?

On Aave, no one chooses their interest rate today, which is continuously recalculated by an algorithmic curve based on the share of liquidity already lent in each pool.

When the demand for borrowing rises, the cost rises with it, and a borrower can see his bill jump overnight without having changed his habits.

The fixed rate reverses this logic. The percentage is fixed at signature, then remains the same until final repayment, and the borrower knows its total cost before even committing.

For example, a fintech company that finances three months of stock wants to budget for this item from the start, instead of discovering its invoice according to the market. At the fixed rate, the cost is written in black and white, which protects its margin.

The target clientele, corporate treasurers, fintechs and financial institutions, have always lived at this pace. Traditional finance operates largely on this basis.

Aave is already increasing its gestures towards these players, after having adopted Chainlink's 24/7 prices for its loans at the end of October.

The network has what it takes to attract this clientele. Aave says it manages more than 30 billion placed on the protocol, including 12 billion in active loans, figures provided by the company.

The integration remains to be written. The V4 architecture is designed for more varied credit structures than the current protocol. Any integration into the heart of the protocol would also require a vote by the holders of the AAVE token.