Aave: Everything You Need to Know on the Popular DeFi Protocol

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Aave: Everything You Need to Know on the Popular DeFi Protocol

What Is Aave

That’s almost 2 million AAVE, or just above 12% of the total supply. In February 2021, Aave partnered with Balancer to build the “Balancer V2 Asset Manager”, where idle assets on Balancer V2 pool to earn a yield on Aave. Later the same month, Aave announced an investment in Pixelcraft Studios, a Singapore-based company.

Only AAVE that is deposited in the module will get liquidated for the deficit. Deposits into the module are incentivized What Is Aave with a regular yield paid in AAVE. While ETHLend rebranded as Aave, its token LEND stuck around.

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Sign up for free online courses covering the most important core topics in the crypto universe and earn your on-chain certificate – demonstrating your new knowledge of major Web3 topics. AAVE can be used to vote, propose, and decide on new developments in the ecosystem and vote on the protocol parameters. In terms of compatible wallets, since the protocol is built for Ethereum, it only supports EVM-compatible wallets. The supported wallets include Ledger, Portis, Ethereum, Coinbase Wallet, MEW wallet, MetaMask, Torus, Fortmatic, imToken, and Wallet Connect. Aave has several catchy features that make it different from its competitors. Asides from features like overcollateralization, there are features like FlashLoans, creating a leveraged position, and so on.

  • Eligible AAVE holders can thereby discuss, propose, and vote for or against any modification to be implemented on the Aave network.
  • The best way to store AAVE tokens is Atomic Wallet, which integrates seamlessly with many exchanges.
  • In this case, the interest rate is determined algorithmically based on the asset that is borrowed, suggesting that interest on borrowed funds may vary from one to another.
  • It is considered by academics to be a specific way of speaking within the larger categorization of African American English (AAE), or Black English.
  • I even know a white linguist from Holland who speaks fluent AAE as a second language (it’s a language like any other, after all, although that kind of speaker is super rare).
  • Collateral Swapping uses the Flash Loan to swap an existing loan’s underlying collateral.

For such pools, a partner company called Centrifuge helps brick-and-mortar businesses tokenize aspects of their operations. Once tokenized, investors can purchase (or hold as collateral) these tokens, which behave similar to bonds and earn a https://www.tokenexus.com/ yield on their holdings. Thus, these assets can be used as collateral for real-world businesses to borrow cash. Aave seems to be a great protocol for all levels of crypto enthusiasts, offering some unique features and benefits for all users.

Paying back with collateral

Borrowers can choose among the two types of interest rates – stable rate and variable rate. While ETHLend was a novel idea, the platform, along with its token LEND, lost traction heading into the 2018 bear market. Key pain points with the platform were a lack of liquidity and the difficulty in matching loan requests to offers. Every user must clearly understand these risks before using Aave.

Since the profit percentage is low, a large sum is required to make the trade worth it. If they pay it back within the same block, any profit made (minus the network and fixed interest fee) is theirs to keep. Aave may sound like a traditional money trading platform at first. Still, since its inception in 2017 as ETHLend, the platform has consistently introduced innovative products and features to improve the user experience.

How Aave works

The token unlocks greater participation and value accrual aligned with the network’s prosperity. The AAVE token is the backbone of the Aave ecosystem, enabling community governance and incentivization. AAVE is an ERC-20 utility token required for certain activities on the protocol. When the invoices get paid, the business unlocks their wBTC. By broadening acceptable collateral, Aave creates new liquidity streams for real-world financing.

What Is Aave

If the pool’s funds are largely unused, the utilization rate is low. That means the interest is also low to encourage borrowing activity. In March 2022, Aave launched v3 of the protocol, which includes a feature called Portal. Portal allows Aave to operate seamlessly across all blockchains. That means using Aave, you can now participate in lending or borrowing protocols on chains like Solana or Avalanche.

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