With this new feature, any two parties can enter into a trusted agreement in which the depositor’s capital can be borrowed by the counterparty. Interest rates, loan terms, and covenants are baked into an OpenLaw agreement and hashed onchain, providing an immutable point of reference for all parties involved.
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Aave unveils credit delegation for trusted undercollateralized loans
To leverage Credit Delegation, depositors supply capital to Aave and received aTokens in return. They then use these aTokens to open a Credit Delegation Vault with the parameters (like the desired interest rate) and amount of capital that can be borrowed. Borrowers enter into an agreement with the depositor and lock in the terms via an OpenLaw agreement. After the borrower’s address is whitelisted by the depositor who owns the Vault, they can then withdraw capital directly from that Vault without having to post any assets as collateral.
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