Aave (LEND) is a cryptocurrency token and operates on the Ethereum platform. Aave is a decentralized cryptocurrency lending platform. In fact, it was the first DeFi lending protocol when it launched its first main net as ETHlend in 2017 (this was before DeFi was even a thing!).
Aave allows users to lend and borrow cryptocurrencies in a decentralized and trustless manner. Simply put, there is no middle-man involved and no Know Your Customer (KYC) or Anti Money Laundering (AML) documentation is required to use the platform. In a nutshell, lenders deposit their funds into a “pool” from which users can then borrow. Each pool sets aside a small percentage of the asset as reserves to help hedge against any volatility within the protocol. This also conveniently allows lenders to withdraw their funds at any time.
Aave is strong of a +100k community, whose backing and feedback represent an integrated part of the company’s development process.
Aave offers 17 different assets for lending and borrowing including the Dai stablecoin (DAI), USD coin (USDC), True USD (TUSD), Tether (USDT), Synthetix USD (sUSD), Binance USD (BUSD), Ethereum (ETH), ETHlend (LEND), Basic Attention Token (BAT), Kyber Network (KNC), Chainlink (LINK), Decentraland (MANA), Maker (MKR), Augur (REP), Synthetix Network (SNX), Wrapped Bitcoin (wBTC) and 0x (ZRX). While this is an impressive list indeed, not all of them can be used as collateral for a crypto loan. Like other lending protocols within the space, Aave offers overcollateralized loans, meaning that a user must lock an amount of collateral that is larger (in USD) than the amount being withdrawn. This amount depends on the asset and ranges from 50-75%.
“Aave” is a Finnish word which translates to “ghost” in English. The ghost represents Aave’s focus of creating a transparent and open infrastructure for decentralized finance.
Depositors provide liquidity by depositing cryptocurrencies into lending pools which will then allow them to earn interest. Meanwhile, borrowers can obtain loans by tapping into these lending pools in either an overcollateralized or undercollateralized way. The loans do not need to be individually matched i.e. one lender to one borrower. Instead, deposits into the pool and the amounts borrowed/ collateral are used to make instant loans based on the pool’s state. There are currently 2 money markets that users can enter into, these are Aave and Uniswap. Aave will soon be supporting 2 more markets: Set and Next.
Aave’s aim is to fill in the gaps left by centralised fintech industry giants like PayPal, Skrill and Coinbase. Their main product is Aave Protocol, an open source and non-custodial protocol for creating money markets on the Ethereum blockchain.
Aave has one feature that sets it apart from the rest. Flash loans allow customers or to take out loans without any collateral. These flash loans enable a customised smart contract to borrow assets from Aave’s reserve pools within one transaction. The loan is made on the condition that the liquidity is returned to the pool before the transaction ends. However, if it’s not repaid by that time, the transaction gets reversed- which will effectively undo any actions executed until that point and guarantee the safety of the funds in the reserve pool.
* Forex Rating accepts no liability for any errors in the Aave Price or LEND Information. For the most recent information please visit the Aave official site.
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