In this article, I’ll tell you what does AAVE means?
“Aave is a decentralized lending system that lets users lend, borrow, and earn interest on crypto assets without intermediaries. It is one among several new Defi cryptocurrencies.”
Instead, Aave is an innovative contract solution that allows these assets to be handled by a distributed network of computers running its software. It runs on the Ethereum blockchain.
Aave is based out of Switzerland. The decentralized ecosystem was established in Fall 2018 and has already seen widespread adoption with more than 30,000 users across 90 countries. It recently reached an important benchmark – over $500,000 in loan volume per month.
Part of its success can be incentivizing people to participate without asking them to deposit any tokens or collateral like traditional financial institutions do when loaning money for fiat currencies.
How does AAVE operate?
Aave uses an autonomous system that operates on smart contracts communicated directly between lenders and borrowers without intermediaries. It is done via blockchain technology, similar to how payments are made on Ethereum.
Users deposit funds that they want to lend, which are subsequently pooled. When a borrower takes out a loan, they can draw from those pools. Lenders can trade or transfer these tokens as they see fit.
Aave releases two sorts of tokens to assist this activity: atokens, which are issued to lenders so that they can obtain interest on deposits, and AAVE tokens, which are Aave’s native tokens. The AAVE coin provides several benefits to its users. Borrowers who take out loans denominated in the permit, for example, are not charged a fee. Borrowers who utilize AAVE as collateral also receive a fee reduction.
If AAVE owners pay a fee in AAVE, they can look at loans before they are disclosed to the general public. Borrowers who put up AAVE as collateral can get a little more money.
Founder of AAVE:
Aave was founded by Stani Kulechov, who started the company after recognizing issues with traditional lending institutions. He wanted to produce a better solution for crypto users, which led him to launch Aave – an alternative financial network without mediators that allows people to borrow or lend cryptocurrencies at globally-competitive rates and risk levels.
Aave has recently entered into a cooperation agreement with the popular P2P cryptocurrency exchange LocalCoinSwap, where the company’s users will be able to take out loans using their local currency.
It means that anyone who uses Aave can do so regardless of what country they are in or the currency that is native to it. The partnership enables Aave users to access borrowing at better rates than they would get elsewhere, making it an accessible and easy choice for those looking for the best value when it comes to interest rates.
The Defi concept was first developed by crypto trader Ryan Sean Adams, CEO of crypto investment company Mythos Capital who describes it as a financial system that any single party doesn’t own.
It means that none of the Defi platforms hold custody or control of funds – all transactions are made directly between peers. They run on blockchain technology, enabling users to transact without third parties like banks and traditional lenders who cut the interest earned.
“There is no central authority in a DeFi network,” says Adams. “It’s fully peer-to-peer, and anyone has access to the same financial services.”
As one of the first DeFi platforms on Ethereum, it demonstrates how blockchain technology can permeate much more than just digital currencies. It can disrupt the traditional lending industry just like it did with payments.
AAVE –Blockchain Company:
Aave is one of many blockchain companies creating their financial services that are also decentralized and operate on smart contracts. Others include MakerDao, Compound, Dharma, etc. They all use Ethereum’s public blockchain to store data about who has lent money to whom, how much, for how long, at what profit rate, under which conditions. This information is recorded in bulk once every 10 minutes – not precisely real-time transfers but good enough for traders like Stani Kulechov who need to know these amounts ‘immediately.’
Rise of AAVE:
The growth of Aave shows there was a need for this type of alternative lending service, with crypto lending volumes overtaking traditional ones earlier this year. Now blockchain companies are looking at ways to make this more widespread and accessible to a global market.
Another difference with traditional finance is that DeFi platforms do not support fiat currencies like the dollar. Instead, they use tokens created from intelligent contracts on the Ethereum blockchain network, including those made by Aave. DeFi enables people to create these tokens as an alternative type of asset class, stores value for long-term investment, or simply as a form of digital money.
What’s also great about DeFi is how it creates so many options for borrowers who need money to start a business, expand their portfolio or otherwise provide financial services for themselves using their cryptocurrency assets as collateral. In addition to the short-term loans users can get from P2P lenders like LocalCoinSwap, DeFi platforms can provide access to long-term loans that last up to 5 years without the need for collateral. These are known as ‘bond tokens,’ which record how much has been borrowed and at what rate, making this information available to everyone on the blockchain.
“No bank would ever make a five-year loan at 1% interest,” says Kulechov, “but it is possible because of DeFi.”
More about AAVE:
Aave is an alternative financial network without mediators that allows people to borrow or lend cryptocurrencies at globally-competitive rates and risk levels. The company’s users will take out loans using their crypto as collateral and make investments using their digital assets.
Aave is one of many DeFi services companies on the Ethereum blockchain disrupting traditional banking by providing loans or credit at lower interest rates than other institutions. Others include MakerDao, Compound, Dharma, etc. This information is recorded in bulk once every 10 minutes – not precisely real-time transfers but good enough for traders like Stani Kulechov who need to know these amounts ‘immediately.’
AAVE Loans-Flash loans:
AAVE allows certain loans, called flash loans, to be processed in seconds. For example, a user’s flash loan of $5 taken out will appear on the blockchain and can be lent out and traded 10 minutes later for $6, minus some service fees that must be paid for using AAVE tokens.
This demonstrates how blockchains can go beyond simply storing value or tokenizing assets to become a platform from which new and novel products and services are created, such as alternative lending facilities.
Aave encourages users to get involved by creating an account and linking their ERC-20 compatible wallets. This allows them to deposit tokens into one of these wallets to establish themselves as potential lenders or borrowers. The company will then monitor transactions on the Ethereum blockchain for particular circumstances where it needs to step in, for example, if borrowers miss payments or don’t make use of their loans after they’ve been extended to them.