Crypto lending protocol, Aave, has integrated the Proof of Reserves (PoR) feature by Chainlink on Avalanche blockchain. This integration was done by Bored Ghosts Developers (BGD) labs. This move will ensure that wrapped tokens in Aave markets on Avalanche are maximally collateralized.
Chainlink announced this in a Twitter post, stating that PoR helps mitigate risks associated with cross-chain bridges using trust-minimized verification.
Chainlink’s PoR incorporates the most expansive decentralized collection of security-reviewed and Sybil-resistant node operators. These operators verify and monitor on-chain and off-chain assets, including wrapped tokens.
This integration will enable transparency in monitoring the financial condition of liquidity pools on Avalanche-based Aave protocol which contains wrapped tokens like AAVE.e, DAI.e, LINK.e, WBTC.e, and WETH.e.
Also, the integration ensures that bridged assets are adequately collateralized. Hence, technical and economic risks associated with liquidity pools involving undercollateralized bridged assets on Aave markets are reduced.
Automated on-chain data will be provided to minimize the risk of using wrapped tokens. This will further ensure security for users.
According to a statement by Stani Kulechov, founder and CEO of Aave Companies,
"Real-time access to the state of cross-chain liquidity pools increases the transparency and verifiability of the Aave market on Avalanche. Bringing additional visibility into reserve collateral is a necessary step forward and will help build more confidence and trust with end-users."
Also, some advantages of using Chainlink’s PoR feature include automated on-chain verification, high-quality data through customizable external adapters, decentralization at the data source and oracle node level, and transparency in anyone's ability to monitor PoR at any time.
