How Aave Works

We operate in Aave v3 (conceptually; chain-specific params vary):

• Supply: deposit USDC → receive aUSDC; balance grows as interest accrues.

• Borrow: a borrower takes USDC and receives variable or stable debt (stable often disabled for some stables).

• Interest: utilization-based curves with a kink; $supply APR ≈ borrow APR × (1 − reserve factor) × utilization.$

• Risk settings: per-asset LTV, liquidation threshold, liquidation bonus, caps; optional eMode (higher LTV for correlated assets).

• Credit delegation: the supplier authorizes a borrower to draw debt against the supplier’s collateral by calling approveDelegation() on Aave’s debt token. The borrower can then borrow() without posting its own collateral. If the borrower fails to repay, the delegator’s collateral is at risk.

Our initial scope is simple: pockets supply only (no native borrowing). We enable credit delegation to whitelisted settlement actors for instant pulls, with strict caps so HF never approaches liquidation.