Decentralization has been the goal of multiple crypto communities since the birth of Bitcoin, especially since cryptocurrencies have become so popular. These decentralized and crypto-based currencies have made way for their technology in society. Blockchain is closely tied to the foundation of these cryptocurrencies, but it is just one of the applications of this technology.
Its characteristics go much further than serving to keep track of the transactions of each of the cryptocurrencies. And it is precisely its characteristics that have attracted a large number of companies and institutions to implement this technology. Among so many financial projects that seek decentralization (DeFi), we will answer those who ask “What is AAVE?”, With a review of its structure and most important aspects.
Disclaimer: the information provided in this post shouldn’t be considered investment advice. This is just for educational purposes only. We are not financial advisors and we are not responsible for any investment decision you make. AAVE is very risky as well as the cryptocurrency market. Never invest more than what you are able to lose and always request information to your professional financial advisor.
What is AAVE?
Founded in May 2017 by Stani Kulechov, Aave is a blockchain project that had an ICO (Initial Coin Offering) with which it raised $16.2 million to create a decentralized lending platform.
This network offers a wide variety of products, from environmental accounts, loan software, custody and payment services to blockchain-based games and developer tools.
Some of these services, for example, seek to offer the possibility of earning interest on deposits and asset loans with a variable or stable interest rate.
Another type of loan offered is the flash loan. This is an ultra-short duration unsecured loan that is specially designed to be integrated into other products and services.
Aave is an emerging and innovative technology company that seeks to train people to use new technologies.
About the LEND token
If you want to know what AAVE’s cryptocurrency is all about, take a close look at LEND. he LEND token is one of the key elements for the AAVE protocol. The functionalities and advantages of this cryptocurrency is one of the most valuable pieces within the DeFi ecosystem. LEND is an ERC-20 token and how it uses the ETH token algorithm. It is not a cryptocurrency that works thanks to mining.
The platform’s token does not have a maximum supply set and its protocol will be in charge of collecting part of the fees charged by the platform to burn the tokens.
LEND, as usual, will be used to govern the Aave protocol. Its possession will allow it to propose, vote and decide on new addictions, characteristics, assets and power of decision on the parameters of the protocol.
What is AAVE trying to do? The goal of this project is very clear and it is providing liquidity. The Aave loan modality implements a strategy totally based on the common fund. Basically, the project achieves liquidity thanks to the lenders who deposit cryptocurrencies in a group contract. And this same contract allows funds to be requested by other users by placing a guarantee.
For this to work, it is not necessary for the loans to be matched individually, it will hardly depend on the pooled funds, the amounts loaned and their guarantees. In this way, instant loans with characteristics based on the status of the group are viable and allowed.
Unsecured loans also take place on the platform thanks to an implanted method in which, if it is not paid within the blocking time, the transaction is reversed. These types of loans are designed so that developers can use them to create capital-intensive tools for arbitration, refinancing or settlement purposes.
Another curiosity of the Aave project is that it allows the interest rate to be established according to the user wishes. It allows you to choose between fixed and variable interest rates and establish one or another option as you see fit. In other words, you could start with a fixed rate if you think that the interest rate will increase and, perfectly, change it to variable when you think it will decrease, to later fix it again and thus achieve a reduction in your borrowing cost.
Now that the “what is AAVE” question has been answered, anyone that’s interested should check out the LEND token and follow its performance on the market, as well as the development of the AAVE platform.