Aave is a decentralized currency market that enables consumers to lend and borrow various crypto assets. Aave differentiates itself from the restrictions on cryptocurrency with which consumers can obtain loans, and allows lenders to earn passive income from the money they provide.
It runs on the Ethereum blockchain, a smart contract system that can manage these assets through a distributed computer network that runs its software. This means that Aave users do not have to rely on specific organizations or individuals to manage their money. All they need is the confidence that their code will be executed in writing.
The main function provided by the reboot is that of the Aave algorithmic currency market. While ETHLend will compete personally with lenders, Aave has implemented a liquidity survey system, integrated crypto assets, and fixed interest rates through loan-based algorithms. Under the new system, if the supply of assets is insufficient, the rate of interest will be fixed higher to encourage lenders to make more contributions; Conversely, if the supply of assets is sufficient, then the interest rate will be fixed higher for the convenience of the borrower. Get loans.
What is AAVE?
Aave is a decentralized system that allows a person to get loans and interest on crypto assets without any intermediaries. In fact, Aave can create a lending pool that enables a person to lend or borrow 17 different cryptocurrencies, including BITCoin, MANACoin, and ETHCoin. Like other Ethereum lending systems, Aave lenders must issue security instructions before lending. In addition, they can only submit the guaranteed price that they post.
The lender receives money in the form of special tokens called tokens that match the value of another asset. The token is then encrypted so that the lender can earn interest on the deposit. It can help borrowers gain access to cryptocurrencies without owning many cryptocurrencies.
Aave can also offer additional features, such as instant currency loans and other types of currency loans and credits that use the unique design features of the blockchain.
Stani Kulechov explores the potential of Ethereum to transform the traditional financial system and developed Aave in 2017. After raising an initial ICO of $16.2 million, Aave was initially launched in the form of ETHLend with the original token.
Kulechov’s original vision was to create a platform that could be used by cryptocurrency lenders person and match loan applications to a specific person. However, the unfavorable financial situation in 2018 prompted people to rethink the concept of ETHLend and prompted Kuliukov to reconsider his project and rename it Aave. ETHLend relaunched as Aave in 2020.
How Does Aave Work?
Aave is best described as a loan pool system. Consumers collect the borrowed money and deposit it in the pool. When making a loan, the borrower can break these locks. These tokens can be traded or transferred at the lender’s discretion. Aave has issued two types of tokens: one is a token issued to creditors to collect interest on deposits, and the other is an Aave token, which is the original Aave token.
Aave provides many benefits to cryptocurrency holders. For example, AAVE lenders will not charge any fees for outstanding loans using tokens. Additionally, borrowers who use AAVE as a security detonator can receive fee reductions. AAVE owners can carefully review and issue loans to the public before paying the AAVE fee. Lenders who use AAVE as collateral can borrow a bit more.
Certain loans called “Quick Loans” are allowed to be issued and settled quickly. These loans do not require direct collateral, they almost are. instantaneous. Fast loans are useful for all blockchains, that is, when a transaction ends, the network accepts a new transaction data packet called a blockchain. It takes time to add each new block. On Ethereum, it’s 13 seconds. Therefore, Aave instant loan was completed in 13 seconds.
The working principle of instant loans is: borrowers can apply for funds from Aave, but they must pay the amount and 0.09% of the fee in the same block. If the borrower does not do this, the entire transaction will be canceled and therefore the loan will never be obtained.
Aave provides loan facilities in different cryptocurrencies, but under the pool system, borrowers must pay a deposit that exceeds the amount they can borrow. For example, if the borrower borrows $10 in Ether, he must deposit more than $10 in another cryptocurrency. In order to calculate the volatility of the cryptocurrency market, the Aave protocol includes an algorithm that automatically filters out borrowers’ excess collateral if its value is less than a certain percentage. Every loan on the network is managed through an intelligent protocol that is verified by a third-party auditor.
Aave introduced the AAVE symbol in the rebranding. The advantage of using AAVE tokens on the blockchain is that users who provide AAVE as collateral are exempt from transaction fees, while users who receive AAVE are not charged. AAVE owners are also entitled to control the Aave network, depending on the number of AAVEs they own.