Aave

Aave is a decentralized lending and borrowing platform originally built atop the Ethereum network and has since expanded to other chains, such as Avalanche, Fantom, and Harmony.

What is Aave?

The Aave protocol uses a so called decentralized autonomous organization, or DAO, which means that it’s operated and governed by the people who hold and vote with AAVE tokens.

Users can use Aave as depositors or borrowers. Depositors deposit their digital assets into "liquidity pools," which become funds that the protocol can lend out.

How does it work?

Traditionally, to get a loan, you'd need to go to a bank or other financial institution. The bank will ask for collateral, such as house, apartment or car in exchange for the loan. You then pay the principal and interest to the bank every month.

In case of DeFi there is no bank. Instead, lending and borrowing is controlled through the use of smart contracts, what removes the need of middlemen.

In practice, that means that you can get a loan in crypto from people instead of financial institutions, however you still have to put up collateral in form of other coins or tokens.

Use in practice

Users deposit digital assets into liquidity pools by transferring them from their coin wallet. These become funds that the protocol can then lend out. Anyone who deposits their tokens into a pool, receives new aTokens. (the "a" stand for "Aave.") So, if you deposit DAI to the liquidity pool, you'll receive aDAI in return.

The interest rate you’ll get in return is determined by the ratio between supplied and borrowed DAI in the pool. The same applies to borrowers, interest rates vary depending on what you're borrowing.

The supplied DAI can then be used by borrowers, but in order to make sure the borrowers don’t disappear with the loan, they have to provide a collateral. This means all standard loans in Aave are over-collateralized, which protects the whole protocol.

For example, if you have ETH you plan to hold, and want to borrow DAI, you can use your ETH as collateral until you pay back your loan on DAI.

What is AAVE token?

AAVE token is the native token of the Aave platform and is primarily used as a governance token. AAVE token-holders collectively discuss, propose, and vote on upgrades to the protocol.

Another advantage of tokens is, that users who deposit AAVE as collateral can get a transaction fee discount, and the users who borrow the AAVE are not charged any fee.

Apart from this, AAVE can be staked, which enables users to earn staking rewards and fees from the protocol.

Website

Visit the official cryptocurrency website. It contains detailed valuable information about the coin and the project. You'll also find answers to frequently asked questions, various support and training tools, or interesting coin news and articles.

WhitePaper

WhitePaper is a basic informative document that contains a detailed description of a crypto project, its purpose, the idea of its creation, technical specifications, statistics, diagrams, roadmap, and other important facts, including information about the coin and its use and future potential. It is usually created by the founders or developers of a crypto project.