Credit Delegation

Credit delegation allows a supplier to contribute liquidity to the Aave protocol to earn interest, and delegate borrowing power (i.e. their credit) to other users. The enforcement of the borrow position and its terms are agreed upon between the supplier and borrowers, which can be either offchain via legal agreements or onchain via smart contracts.

This enables:

Borrow by delegatee must be consistent with delegator eMode category. For eg. if a delegator eMode category is STABLECOINS, then

The delegatee cannot abuse credit approval to liquidate delegator i.e. if the borrow puts delegator's position in HF < HEALTH_FACTOR_LIQUIDATION_THRESHOLD, then borrow will fail.

The approveDelegation or delegationWithSig function on the VariableDebtToken contract must be called by the supplier (delegator), approving the borrower (delegatee) a certain amount.

This is done for each debt token that needs to be delegated.

The delegator does not need to already have supplied funds in the protocol to approveDelegation. However, before the delegatee executes borrow, there must be sufficient collateral supplied by delegator in the protocol.

The borrower (delegatee) calls the borrow function on the Pool, using the supplier's (delegator's) address in final parameter onBehalfOf.

The borrower's available credit is reduced by the borrowed amount.

Anyone can repay the borrow position OnBehalf of the user, by calling one of the following Pool functions - repay or repayWithPermit. The supplier (aka creditor) can also use the repayWithATokens function to repay a borrow position with their aTokens of the underlying asset in the same pool.