Aave Overview
Aave is an open-source DeFi protocol. It allows users to lend and borrow crypto assets on the Ethereum blockchain. The ecosystem uses the AAVE token for various purposes.
Aave History
Aave’s journey began in 2017 with an ICO by ETHLend, founded by Stani Kulechov. ETHLend connected borrowers and lenders for loans. In 2018, Aave emerged as the parent company, shifting the focus to liquidity pools for borrowing and lending. Aave’s platform launched in January 2020.
In October 2020, Aave swapped LEND tokens for AAVE tokens. This swap reduced the token supply from 1.3 billion LEND to 16 million AAVE. Each 100 LEND tokens converted to 1 AAVE. AAVE tokens now play a vital role in Aave’s governance.
How Aave Works
Aave supports a variety of Ethereum-based crypto tokens. Borrowers provide collateral and receive loans. They must deposit more collateral than the loan amount to manage volatility risks. Borrowers also pay interest.
Lenders deposit assets into Aave pools and receive aTokens in return. These tokens are named after the deposited asset with an “a” prefix, like aETH for Ether. Each aToken earns interest. Lenders can trade these tokens or redeem them for the original asset plus interest. For instance, lending 15 ETH earns 15 aETH. Redeeming aETH returns the original ETH plus interest. Selling aTokens transfers the loan and interest to the buyer.
Aave offers flash loans, requiring no collateral but needing quick repayment with a fee. The fee benefits the pool lenders.
AAVE Token
AAVE is an ERC-20 token on Ethereum. It’s not a coin but a token. AAVE’s price history is shown in the AAVE price chart. The live AAVE-to-USD price is also available, showing the token’s market value changes.
