Aave, a popular DeFi lending protocol, will integrate proof of reserve PoR to secure linked assets on Avalanche, a layer-one blockchain focusing on smart contracts. In the wake of FTX, firms are trying to rebuild customer trust.
Earlier this month, a member of the protocol’s community submitted the proposal. The governance forum has said that the initial version will only support one network where Aave is installed. As a result, the protocol will be able to secure one of the largest non-Ethereum Aave networks.
The proposal stated:
Because Chainlink has been working on this instance of PoR for the longest period, we are confident in its stability.
Nearly 100% of voters from The DAO behind Aave, the popular Decentralized Finance protocol running on Ethereum, approved Chainlink’s Proof-of-Reserve smart contract. This approval will specifically include both v2 and v3 updates of Aave, which is running on Avalanche Blockchain.
Aave v3 on Avalanche offers bridged versions of several assets, including DAI, USDC, USDT, and LINK. These assets are exposed to a wide range of hacks, including the infamous “infinite minting attack.” The introduction of PoR will offer an extra layer of security against such attacks.
However, this configuration introduces several security bugs, and hackers have repeatedly attacked token bridges.
This year, Web3 game Axie Infinity’s Ronin network and cross-chain protocol Nomad were hit with nearly $800 million in hacks due to token bridge breaches.
Aave Will Employ ChainLink PoR After The Demise Of FTX
Chainlink launched its proof of reserve service in early November, the same day FTX went bankrupt. The Oracle network promoted this feature as a strategy to regain trust in crypto exchanges in the face of increasing fears about the crypto sector on a global scale. Due to Aave’s latest decision, chainlink’s PoR service has now made its way into the DeFi market.
#Crypto is at a crossroads.
Will crypto continue to repeat the mistakes of the traditional black-box financial industry? Or will a better system emerge?
A better system is possible, & Proof of Reserve is one way #Chainlink is providing the transparency that users demand.
— Chainlink (@chainlink) November 10, 2022
Max Melcher, a member of Chainlink Labs’ PoR team, said:
Leveraging Chainlink Proof of Reserve, Aave can verify that bridged assets accepted on the platform are fully collateralized before allowing users to borrow against them.
Because the industry is demanding more transparency from trading platforms, proof of reserves has recently been in the news after the collapse of FTX.
The reserve ratios of prominent exchange Crypto.com revealed earlier this month that investors’ valuables are securely protected. Binance’s auditor Mazars severed connections with the exchange last week, raising concerns about the exchange’s reserves, or lack thereof.
Ernesto Boado, co-founder of Bored Ghost Developing and former chief technology officer at Aave, Said:
The focus is more on automatically detecting and acting whenever any symptom of security issues on a bridge appears.
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The Web3 company behind the proposal, Bored Ghost Developing, claims that their PoR smart contracts would not only add an extra layer of protection to Aave’s Avalanche implementation but will also improve and reduce attacks on network bridging assets.
Ernesto Boado also stated:
We think that obviously, transparency goes first, in this case, our development goes a step further.