Aave (AAVE) — what is the project, how it works, what are the prospects
The cryptocurrency Aave (AAVE) was created for the field of decentralized lending. It allows you to lend cryptocurrencies for interest and receive loans. There have already been projects in the industry that work in decentralized lending, but Aave offered some interesting features.
How the project works
Aave generates a fund from investments made by users of the platforms. From it, other users can receive loans. Each pool has a small pool of reserve assets to pay off volatility. It also allows depositors to withdraw money at any time without the risk of revoking the loan. Like other blockchain-based lending services, Aave requires collateral when taking out a loan. Also, do not forget that exchanging ONG to AAVE today is not a problem.
The network offers many interesting features and loan formats. It works with many cryptocurrencies in which to lend or borrow. You can work with Dai [DAI], Ethereum [ETH], Tether [USDT], Wrapped Bitcoin [WBTC], and other Ethereum-based coins. Among all “debt” protocols, Aave has the broadest functionality.
Aave allows you to get quick loans without any collateral (Flash Loans). Instead of collateral, the project relies on the speed of repayment. If a loan is disbursed and repaid within one block, it is approved. If the loan is not repaid within a block, it is not approved.
The project charges 0.3% for issuing a loan, which gives it a steady flow of money. The Flash Loans format allows for safe arbitrage, and the depositor does not risk their money. Only automated services that perform instant trades in cryptocurrency take loans for such a short time.
Flexible interest rates
Usually, decentralized loan services set fixed interest rates. On Aave, you can choose the best rate between stable and variable. After launching this system in May 2020, the project had a serious influx of customers, “stable” rates were in demand.
Variative rates are calculated by a special algorithm, taking into account the current market situation. Calculations are based on the supply of each specific cryptocurrency on the service. “Stable” rates – the average value of rates for the last 30 days. The entire history of their changes can be viewed when granting or receiving a loan.
In addition to the usual popular cryptocurrencies, the service allows you to pledge Uniswap and TokenSets. This will enable you to earn interest on holding these cryptocurrencies in stacking and simultaneously receive loans at a lower interest rate than stacking gives. You can also get interest from cryptocurrencies and AAVE at the same time when lending to other users.
Some of the pluses include the following:
- Rate dynamics. Aave tokens are rising in value, and the network’s capitalization has grown over the life of the project. The developers also say they are seeing a growing user base as interest in decentralized finance increases.
- Crypto to fiat exchange pairs already include this currency.
- Anonymity. Aave customers don’t have to go through KYC or other anti-money laundering or anti-terrorism financing procedures to lend money or receive loans.
- The team. Project creator Stani Kuleshov has worked in decentralized lending on other blockchain projects. He brought his experience from there to Aave and implemented features the competitors didn’t have.
So it is worth investing in Aave cryptocurrency.