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Aave Integrates Chainlink Proof Of Reserve On Avalanche To Ensure Sufficient Collateralization Of Wrapped Assets

In the aftermath of the FTX collapse last November, Chainlink co-founder Sergey Nazarov appeared on Nasdaq TradeTalks to explain why he believes Chainlink Proof of Reserve (PoR) should be the new minimum standard for transparency to prevent similar solvency problems in the crypto and traditional financial markets.

“What Proof of Reserve will do is it will allow exchanges and various other financial products that are in the blockchain industry, and also outside the blockchain industry, to prove their solvency on a real-time basis rather than once a year or sometimes not at all,” Nazarov said.

He predicted the FTX fallout would lead to a “massive spike” in adoption of PoR.

Today, Chainlink and web3 development initiative BGD Labs announced Aave Protocol’s integration of PoR on Avalanche mainnet in order to ensure adequate collateralization of wrapped assets AAVE.e, DAI.e, LINK.e, WBTC.e, and WETH.e in Aave markets on the Avalanche network.

Aave Protocol is a non-custodial, open-source decentralized liquidity protocol that enables users to supply and borrow crypto assets. In 2022, Chainlink oracles facilitated over $2 trillion in transaction value on Aave’s platform. 

“We are excited that Aave is using Chainlink Proof of Reserve to help ensure that cross-chain assets in Aave pools on Avalanche are sufficiently collateralized,” said Nazarov in an official announcement. “Fully-decentralized, automated verification through Chainlink PoR helps mitigate undercollateralization risks that cross-chain bridges can pose to Aave markets.” 

Last month on CNBC, Nazarov said PoR is the key to realizing crypto’s thesis as an alternative financial system built on transparency. He pointed to mounting user demand for transparency as a major force driving PoR’s adoption.

Founder and CEO of Aave Companies, Stani Kulechov, echoed this idea, calling Aave’s integration of PoR “a necessary step forward” in ensuring Aave’s end users have the highest degree of confidence in the protocol’s reliability.

“Real-time access to the state of cross-chain liquidity pools increases the transparency and verifiability of the Aave market on Avalanche,” he said.

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