Aave

AAVE

What is Aave?

Aave Protocol, initially launched by Aave (originally ETHLend), is an innovative open-source and non-custodial protocol enabling Decentralised lending and borrowing. Users deposit assets to create liquidity pools from which others can borrow using their crypto as collateral. Interest rates in the Aave ecosystem are algorithmically derived based on the pool's supply and demand dynamics. Aave distinguishes itself by pioneering features such as flash loans - uncollateralised loans that must be repaid within the same transaction. Moreover, depositors receive aTokens, which represent their stake in the pool and accumulate interest in real time.

What can you do with Aave?

• Providing liquidity by depositing assets into a pool to earn interest
• Securing a loan by borrowing against collateral with either stable or variable interest rates
• Conducting flash loans for arbitrage, collateral swapping, or self-liquidation
• Facilitating rate swapping between fixed and variable interest options for active loans
• Exercising the option of instant loans without the need for matching individual lenders and borrowers
• Enabling liquidation mechanics that incentivize liquidators to maintain protocol health by purchasing undercollateralised debt at a discount
• Supporting Decentralised governance where LEND token holders can vote on protocol upgrades and changes.

Frequently Asked Questions

What is Aave?

Aave is a decentralised finance (DeFi) protocol built on the Ethereum blockchain that enables users to lend or borrow cryptocurrencies without intermediaries.

How does lending on Aave work?

Lending on Aave works by users depositing crypto into Aave’s liquidity pools, and in return, users receive a token, representing their share of the pool, which accrues interest automatically over time.

Who leads in active loans for lending?

Aave leads in active loans for lending, with over 60% of the total lending market share.

Which metrics are important to analyse Aave?

A few important metrics while analysing Aave include PF ratio, NVT ratio, TVL, Active addresses, and Active loans.

What is TVL in Aave?

Total Value Locked (TVL) in aave represents the total dollar value of crypto assets that users have deposited and locked for activities like lending, borrowing and staking. Overall, this metric shows the confidence users have in the protocol.