Aada Finance on Track to Become First Lending Protocol to Support Cardano Tokens

Input Output, the company behind Cardano, has announced the launch date for its first lending and borrowing protocol, Aada Finance, on the Cardano blockchain.

The launch of V1 will take place on Sept. 13, 2022, and will mark the first time that decentralized finance (DeFi) primitives come to the Cardano blockchain, built on the foundation of the Plutus smart contract platform first introduced in the Alonzo hard fork in September 2021.

Aada Finance uses a novel DeFi primitive called NFT bonds to streamline the user experience of borrowing and lending.

According to the project’s Twitter handle, engagement with the crypto community about the project began around October 2021. The decentralized app was first launched in May 2022 on the Cardano testnet. This parallel blockchain serves as a testing environment for new applications before they are deployed on the mainnet.

Could ADA see growth in adoption following the V1 launch?

In June 2022, Cardano’s upcoming Vasil hardfork project received 13,003 commits as developers prepared their code to handle new functionality. During the same period, the number of wallets increased by 1.8% to 3.4 million, indicating confidence in the ecosystem. The number of transactions on the network grew to 44 million, as activity on the network spiked 5.4% compared to the previous month. Both bode well for the success of Aada Finance.

Another metric that bears relevance is the total value locked. At its peak, the total value locked in decentralized protocols on Cardano was $192.35M, which has since dropped to under $81 million, according to DeFi Llama. The introduction of Aada Finance could give TVL a boost since the previous high corresponded with the flood of decentralized applications like SundaeSwap (SUNDAE), Minswap (MIN), MuesliSwap (MILK), ADAX Pro (ADAX), and VyFinance (VYFI).

Aada recently entered a partnership with Minswap to help liquidate loans when a loan-to-collateral value drops to a specific level. Minswap’s liquidity will be used in the liquidation process.

Audit could prevent hiccups on mainnet

But the protocol’s success will depend on Aada Finance working correctly on the mainnet.

Two previous incidents give cause for concern. Following the launch of Cardano’s NFT marketplace jpg.store in January 2022, the mainnet experienced congestion that affected transaction finality time. The launch of SundaeSwap, also in January 2022, experienced similar congestion issues.

Working in Aada’s favor is a recent audit of its smart contract code. Blockchain security experts Vacuumlabs audited Aada Finance’s smart contracts in preparation for launch on the Cardano mainnet. The audit included extensive penetration testing with ethical hacking to determine risks and potential mitigations.

In other Cardano news, Cardano’s parent company Input Output Global recently partnered with Pezesha, an African fintech company enabling financial institutions to provide liquidity to small-to-medium businesses. Notably, Cardano’s role will help simplify regulated borrowing and lending between participants scattered all around the globe.