What is Aave?
Aave is a money market platform that facilitates over-collateralized borrowing and decentralized lending of volatile crypto assets.
Background
Stani Kulechov founded Aave in 2017. Originally, Aave protocol was called ETHLend, one of the first popular DeFi apps to launch on Ethereum.
How Does It Work
Aave users can lend tokens to any money market listed on Aave and earn interest by holding aTokens. Borrowers with sufficient collateral can take out loans from any money market at fixed or variable interest rates. When the collateral value is insufficient to maintain a predetermined loan-to-value ratio; the loan defaults and is subject to liquidation. Any user may liquidate the loan by purchasing the collateral at a discounted price. Borrowers who repay loans in the same transaction can borrow without posting collateral using flash loans.
$AAVE is the native token of Aave. Token holders can vote to support different collateral assets; change permitted loan-to-value ratios, deploy treasury assets, and other similar decisions. Token holders can also stake tokens into a safety module to earn token rewards and backstop any bad debt.
Key Takeaways
- Initially founded in 2017 by Stani Kulechov as ETHLend.
- Transitioned from ETHLend and the $LEND token to the Aave brand and $AAVE token in 2020.
- The protocol is live on Ethereum, Base, Arbitrum, Avalance, Fantom, Harmony, Optimism, Polygon, and Metis.
- Aave pioneered and developed the technology around flash loans in 2020.
- It is one of the most popular and widely used protocols in DeFi.