AAVE

Overview

Decentralized finance aims at eliminating intermediaries and building a financial landscape that is transparent, open-source, permissionless and decentralized in nature. The DeFi platforms function without a single point of control or authority and allow users to have control over their assets in their entirety, conduct various P2P transactions and exchanges.

With DeFi, people can now engage in lucrative financial activities like earning high interests, trading their cryptocurrencies, insuring against risks, speculating price fluctuations on assets and borrowing funds from each other within a decentralized blockchain ecosystem. One such efficient DeFi platform is Aave which offers decentralized lending and borrowing services to the people. It provides pools for physical assets like real estate, payment advances and cargo & freight invoices.

About Aave

Aave is distributed non-custodial liquidity protocol built over Ethereum which is open-source in nature. DeFi users can engage in various financial activities on the Aave platform as borrowers and depositors. Depositors offer liquidity to the market to gain a passive income whereas the borrowers are allowed to borrow in a one-block liquidity way or can also borrow in an overcollateralized way.

This liquidity protocol mints aTokens based on the supplied assets' value at the time when the protocol is providing liquidity in the form of a lender. DeFi users can start earning interest as a lender on the Aave platform and their aTokens increase in this process, which are allowed to be:

1. Transferred
2. Exchanged
3. Deposited

Aave accepts different assets in the form of collateral and each varied asset will have a different interest rate and liquidation penalty. It also has its own Liquidity Reserve that enables its users to withdraw liquidity freely without any permission. This non-custodial liquidity protocol created a major buzz with the launch of its Flash Loans, which are basically uncollateralized lending, borrowing and repaying taking place in a single transaction. Aave was initially launched by the name ‘ETHLend’ in 2017 and since then it has been evolving the sector of decentralized finance making it more secure and easy to access.

Aave architecture

V3 of the Aave Liquidity Protocol allows the users to regulate their assets supplied to the Aave Protocol in context to the yield generation and the borrowing power. Aave Protocol’s architecture has a portal at its core which allows the flow of liquidity between the various Aave V3 DeFi markets spread across multiple networks. It allows the governance verified bridges to burn all the atokens on the main or the host network while simultaneously minting them on the network to which they are to be delivered. The underlying network assets are then fit to be supplied to the Aave V3 Protocol on the destination network in a suspended manner, by transferring it to the after it has been via a bridge.

Aave’s Consensus Algorithm

Built on the Ethereum network, Aave Liquidity Protocol has revamped the decentralized financial sector as it functions based on the Proof-of-Stake consensus algorithm with the V3 technology providing collateralized as well as non-collateralized loans.

Key features of Aave

1. Non-custodial DeFi lending protocol
2. User-friendly DeFi interface
3. Lucrative lending interest rates
4. Flash loans for short-term finance in the crypto space
5. aTokens accruing interest in the form of passive income
6. Rate change for borrowers' convenience

Founder of Aave

Stani Kulechov

Popular use cases of Aave

1. Aave Arc
2. Fantom
3. Arbitrum
4. Arbitrum