What is AAVE?
Aave is a decentralised non-custodial liquidity market protocol where users can participate as suppliers or borrowers. Suppliers provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an over-collateralized (perpetually) or under-collateralized (one-block liquidity) fashion.
Launched in 2017 by Stani Kulechou, Aave is an open-source DeFi protocol for crypto lending and borrowing built on the ETH network. It was launched initially as Eth-lend and was then, the first P2P money marketplace for lending and borrowing of crypto assets. However, during the bear season in 2018, ETHLend suffered liquidity issues that it became difficult to match loan requests. In a bid to restore the platform, the team at ETHLend rebranded to Aave and launched Aave V1 2020. This saw Aave evolve from a P2P to becoming a full pool-based protocol; providing expanded financial services than the former.
Aave is a non-custodial protocol that connects liquidity suppliers with borrowers, it has simplified and expedited the process of lending digital assets and earning interest. Users can acquire a fast loan via the company's DeFi lending market in addition to loans.
These short-term loans are not secured and come with costs; however, the maximum amount of such loans is usually kept low. A long and outstanding list of stakeholders maintains the platform's solid governance while also actively contributing. This enhances the community experience, particularly for novices or new users. The network also provides aTokens (Aave interest-bearing tokens) to assist users in indirectly earning through liquidity mining. Aave allows users to earn interest on aUSDT, aDai, and other stablecoins.
Aave is a loan and borrowing platform for digital assets and cryptocurrencies. The protocol can be used to borrow or lend crypto, with interest being paid back. Some tokens have no transactional fee, but the system charges for rapid loans.
One of the benefits of having such a wide scale of operation and utilization is that interest rates for particular assets are steady. Aave supports around 15 crypto assets, albeit not all of them can be utilized as collateral for a crypto loan. ETH, ETHlend, and other assets are examples of these assets.
What Problem does Aave solve?
A lot of people own cryptocurrency but aren't able to translate the value of those assets into fiat currency they can use to pay for real world items.
Aave protocol helps users bridge this gap and gives them fiat currency in exchange for posting their crypto as collateral.
With Aave, you're able to supply a cryptocurrency and earn passive income based on the market borrowing demand without the involvement of a third party. The supplied asset can also be used as collateral for borrowing assets and the interest earned by supplying funds helps to offset the interest rate accumulated by borrowing.
Interaction with Aave protocol has low transaction fees for Ethereum Blockchain, which depend on the network status and transaction complexity. The maximum amount you can borrow depends on the value you have supplied and the available liquidity.
Who uses Aave?
Aave protocol is user friendly and available for use by all cryptocurrency users. Individuals can deposit their asset to earn passive income and also use the deposited asset as a collateral to borrow assets of their choice.
It's used by anyone who needs to translate the value of their crypto into other currencies or earn passive income by putting it up for other sto borrow.
How to get started with Aave?
Visit the Aave site and connect your wallet (metamask). Navigate to the supply section and click on "Supply" to supply an asset. Select the amount you'd like to supply and click on submit. Once the transaction is confirmed, the supply is successful and earning begins.
To borrow an asset you need to supply any asset to be used as collateral, then simply navigate to the borrow section and click on “Borrow” for the asset you want to borrow. Set the amount you need based on your available supplies that would be used as a collateral for the loan. Select either stable or variable rate and confirm your transaction. You can always change your rate afterwards as many times as you want.