Aave Labs, the company behind the decentralized finance (DeFi) lending protocol Aave, is launching a new retail savings application called Aave App, designed to rival traditional banks and fintech firms. The app aims to attract digital natives who are dissatisfied with the low-interest rates offered by conventional banks.

The Aave App will offer yields of up to 9% and provide $1 million in protection against security breaches and technology failures for deposits. The base rate will be 5%, with opportunities to increase yields by inviting friends, setting up automated deposits, and completing KYC verification. Interest will accrue constantly. The app supports deposits via bank transfers, debit cards from over 12,000 U.S. banks, and stablecoins. Unlimited stablecoin transfers will also be supported.

Aave Labs emphasizes that its lending markets are over-secured, meaning borrowers must provide more collateral than they borrow. This setup allows Aave to ensure savings are backed by more than 100% of their value. The company earns a return on the small difference between the savings rates offered to users and the underlying rates earned.

Currently, the Aave App is set to debut on the Apple App Store, with an Android version in development. A waitlist for the iOS version is currently open. The app will feature tools to simulate potential investment returns and rewards for recurring deposits.

Aave's move signifies a new phase where DeFi protocols directly compete with banks for consumer deposits and could accelerate stablecoin and on-chain liquidity growth. The company aims to position DeFi as a practical and lower-risk savings alternative, allowing users to earn more than banks without taking on the risks seen in centralized lending blowups of 2022. The launch reflects a growing sentiment within the DeFi space towards safer, lower-yield products to achieve mass adoption, as argued by Ethereum co-founder Vitalik Buterin.