Credit Delegation

Overview

Credit Delegation enables users to delegate their borrowing power to other addresses. This feature allows depositors (delegators) to authorize other users (delegatees) to borrow against the delegator's collateral, enabling trust-based lending arrangements within the protocol.

Key Concepts

Roles

• Delegator: Provides collateral and delegates borrowing power
• Delegatee: Receives authorization to borrow against delegator's collateral
• Protocol: Manages delegation relationships and enforces agreements

Mechanics

• Delegator maintains collateral deposit
• Delegatee can borrow up to authorized limit
• Health factor based on delegator's collateral
• Delegator retains withdrawal rights

How Credit Delegation Works

Setup Process

1. Delegator deposits collateral into Aave
2. Delegator approves delegation to specific address
3. Delegator sets borrowing limits and conditions
4. Delegatee can then borrow within approved limits

Technical Implementation

function approveDelegation(
    address delegatee,
    uint256 amount
) external;

function borrowAllowance(
    address fromUser,
    address toUser,
    address asset
) external view returns (uint256);

Risk Management

For Delegators

• Collateral remains at risk of liquidation
• Responsible for maintaining health factor
• Must trust delegatee to repay
• Should monitor borrowing activity

For Delegatees

• Must maintain agreement terms
• Responsible for loan repayment
• Should communicate with delegator
• Need to monitor market conditions

Use Cases

Business Lending

• Companies accessing credit lines
• Supply chain financing
• Project-based funding
• Working capital loans

Trust-Based Lending

• Family/friend arrangements
• Community lending
• DAO treasury management
• Protocol-to-protocol lending

Technical Details

Delegation Functions

function delegationWithSig(
    address delegator,
    address delegatee,
    uint256 value,
    uint256 deadline,
    uint8 v,
    bytes32 r,
    bytes32 s
) external;

State Management

function getDelegationState(
    address delegator,
    address delegatee,
    address asset
) external view returns (uint256);

Best Practices

For Delegators

1. Carefully vet delegatees
2. Set appropriate borrowing limits
3. Monitor position health
4. Maintain communication channels

For Delegatees

1. Understand delegation terms
2. Monitor borrowed positions
3. Maintain repayment schedule
4. Communicate market changes

Legal Considerations

Agreements

• Consider supplementing with legal contracts
• Define clear terms and conditions
• Specify dispute resolution procedures
• Document all arrangements

Compliance

• Follow applicable regulations
• Maintain proper documentation
• Consider tax implications
• Understand liability exposure

Market Impact

Protocol Benefits

• Increased capital efficiency
• Enhanced protocol utility
• New lending relationships
• Market expansion opportunities

User Benefits

• Access to trusted borrowing
• Flexible lending arrangements
• Relationship-based credit
• Capital efficiency

Note: Credit Delegation involves significant trust between parties. Users should carefully consider the risks and potentially supplement with legal agreements. All parameters and limits are subject to change through governance decisions.