AAVE
Aave is a leading DeFi lending and borrowing protocol
Our Take
Aave is a leading DeFi lending and borrowing protocol with over $12B of total value locked. Aave enables lending and borrowing without a middleman.
Aave is the backbone of much of DeFi and one of the most trusted protocols in the ecosystem. Aave has enabled many retail and institutional users to access DeFi. We believe that Aave will continue to play a huge role in bringing DeFi to the masses.
What is AAVE?
Aave is an open-sourced protocol that lets users lend and borrow cryptocurrency peer-to-peer.
Some features of Aave include:
- Non-Custodial: Aave doesn’t hold your funds, instead funds are locked into a transparent smart contract that sets the rules of the transaction.
- Algorithmic Money Market (AMM): On Aave, users can lend and borrow assets without counterparties. This differs from a traditional transaction where a bank matches lenders and borrowers. Aave loans are obtained from a liquidity pool, which is a crowdsourced pool of crypto assets locked in smart contracts.
- Market Pricing of Interest Rates: Depositors proportionally share the interest paid by the borrowers. If the demand for borrowing increases, the interest rate paid to depositors will be increased to incentivize more depositors.
- Protocol DAO: The protocol itself is a decentralized autonomous organization (DAO) which is governed by the token holders who can make proposals and vote with AAVE tokens.
How to use AAVE?
- Lend your funds: Deposit your funds and receive an aToken, which represents your deposited token (pegged to a 1:1 ratio) plus accrued interest. The aToken can be held, transferred or used to earn yield.
- Borrow funds: Take out a crypto loan by depositing crypto assets as collateral and then borrow a lesser amount against this. To see a walkthrough of lending, borrowing and the risks involved, read our guide here.
- Staking: A native token of the Aave protocol (AAVE) can also be staked to provide financial security to the protocol. Aave offers users tokens as a staking reward.
You’ll need a custodial wallet to connect to Aave. If this is new to you, we encourage you to look at our guides on How to set up a hot wallet? and How to avoid wallet scams?
What’s next for AAVE?
- Aave V3: Aave recently launched V3, which improved capital efficiency and security. Aave added features to ensure improved yield on assets while improving risk management.
- Multichain Approach: Aave V3 allows users to easily move assets from one blockchain to another. Aave is now on seven blockchains: Ethereum, Avalanche, Polygon, Fantom, Optimism, Arbitrum and Harmony.
- Aave Arc: This is a regulatory compliant version of Aave designed for institutional users to gain access to DeFi. Institutional adoption of DeFi is viewed as an enormous untapped market.
“The launch of Aave Arc allows these institutions to participate in DeFi in a compliant way for the very first time.”
-Stani Kulechov, Founder and CEO of Aave
How to work for AAVE?
Check out Aave’s jobs page or join our Odyssey DAO community to ask questions about using the Aave protocol.
Further reading
