Decentralized finance protocol (DeFi) Aave will implement a Proof of Reservation (PoR) system utilizing Chainlink. With the in the system, Aave’s goal is to protect your linked assets in Avalanche. The Decentralized Autonomous Organization (DAO) behind Aave has approved the smart contract that will utilize the PoR. According to the website, the vote received more than 99% in favor, that is, practically unanimity. The new PoR system will specifically cover the Aave(v)2 and v3 versions on the Avalanche blockchain. It is the first time that a DeFi system will use PoR to guarantee reservations on bridges.
fighting blows
Bored Ghost Developing, the Web3 studio behind the proposal, says its PoR smart contracts will add an extra layer of security to Aave’s Avalanche implementation, but can also help mitigate attacks on assets bridging the network. “The focus is more on automatically detecting and taking action whenever any symptoms of safety issues on a bridge appear,” said Ernesto Boado, former chief technology officer at Aave and co-founder of Bored Ghost Developing. “We think that, obviously, transparency comes first, in this case our development goes a step further.” Under the proposal, Aave will use the ChainLink PoR aggregator smart contract to secure tokens on the original network (Ethereum) as well as their bridged versions on the destination network (Avalanche). The PoR system gained prominence after the FTX collapse, which awakened the market to the risk of poor transparency on exchanges. After the company’s downfall, big names like Binance, Crypto.com and KuCoin announced the implementation of PoR to secure their reserves. Last week, however, Mazars, the company that audited Binance’s reserves, severed ties with the exchanges and announced that it would no longer provide this service.
bridge protection
Bridging assets are the way to move value between blockchains using DeFi. Typically, blockchains do not communicate directly with each other. This is why a person cannot send Bitcoin (BTC) to a wallet on the Ethereum (ETH) network, for example. Given this limitation, there are two options for moving assets across different networks. The first is to use wrapped tokens such as Wrapped Bitcoin (WBTC). The second is using the bridges. On bridges, the cryptocurrency is locked into a smart contract on its original blockchain. Then, a token is issued that represents that cryptocurrency on the target network. Once that was done, the transaction took place through that token. Aave is one of the protocols that uses bridges to move cryptocurrencies. In its v3 version in Avalanche there are versions of DAI, USDT and USDC, among other tokens. But while bridges facilitate operations, they create many security vulnerabilities that become vectors for attacks. This year, the two biggest attacks on DeFi occurred precisely on bridges: the Ronin network of the Web3 Axie Infinity game and the Nomad cross-chain protocol. In total, these networks lost over $800 million due to breaches in their token bridges. The Ronin attack, for example, became the biggest attack on a DeFi protocol in history.
