Anyone who has ever had to borrow money from a common banking or financial institution knows how complicated and bureaucratic the process is. Usually, most requests are denied, while the few approved still have several limitations. Aave protocol brings an open-source non-custodial P2P protocol for lending money to revolutionize the market.
How Does Aave Protocol Work?
Here is a quick tutorial on how to use Aave!
Started earlier this year (2020), Aave already has over 50 million USD liquidity locked in their protocol. With highly innovative tools, the project already has some interesting services.
The first is flash loans. It is a powerful tool for developers to borrow liquidity from the protocol, without needing to put up any collateral, provided that the liquidity is returned to the protocol within one transaction (a single block).
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The service has some similar competitors in the market, but Aave stands out from the rest by, instead of just focusing on the total locked amount of assets, they re-use locked assets within the Ethereum ecosystem.
The main goal for flash loans, according to the company, is to help developers build financial products without needing capital, enabling more people to build their online business and enrich the ecosystem.
Another interesting possibility within Aave protocol is that users can switch between stable and variable rates when borrowing so that the interest-rate is always on their side. Usually, variable rates fluctuate a lot, so stable rates give the user some security. The switch is 100% optional and can be used by users anytime.
Start lending crypto on Aave here!
Who Would Have Interest In Aave Protocol?
The team behind the project has clear plans to bring DeFi into the financial mainstream, attracting even more people to use blockchain.
However, there is still an educational barrier in this process, as most people still cannot see the true value behind blockchain, in addition to finding this crypto universe somewhat intimidating.
Today the most active users of Aave are developers (devs), not least because of some platform tools as flash loans do require technical knowledge. Despite this, the platform can be considered open to anyone with an interest in borrowing crypto-based assets.
Are There Any Advantages To Using It?
Aave features interest-bearing tokens called “aTokens”, like when someone deposits an asset in Aave Protocol, a smart contract mints an equivalent amount of aTokens, which are pegged 1:1 to the underlying asset and are sent to the lender.
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Let us say a guy deposits 200 Dai, then he will get 200 aDai in his wallet. According to Aave CEO, the thing is simpler than it looks: “The underlying asset, in this case, the 200 Dai, is loaned out to borrowers, while the aDai accrue interest in real-time directly in your wallet. You can redirect this interest at any time to any Ethereum address, putting you in control over your earnings”.
Who Is Behind The Idea?
The mind behind the project is Stani Kulechov, founder and CEO of Aave. He started to get interested in crypto in college because despite studying law he was always passionate about finance and had a crush on the financial market.
After realizing several inefficiencies within the traditional financial system, Kulechov decided to start in the crypto hustle definitively, so he started working with Ethereum.
Stani also mentor founders and advisors of ICOs along with other blockchain projects, in addition to being spokesperson at Blockchain and cryptocurrency events, especially those related to Ethereum smart contracts.
Conclusion
Aave is an open-source non-custodial money lending protocol based on Ethereum smart contracts. In addition to having over 50 million USD liquidity locked inside the protocol, the Platform also re-uses locked assets within the Ethereum ecosystem.
Today the highlight of the platform is the flash loans, which is a very interesting tool especially for developers, that borrow liquidity from the protocol without needing to put up any collateral, provided that the liquidity is returned to the protocol within a single block.
Despite being a brand-new platform, Aave has already created a definite impact on the blockchain scene and has the potential to be a landmark in the niche, attracting more and more users in the future.