Aave DeFi lending protocol is structured to allow users take and give some kinds of virtual currencies. Many people are drawn to Aave because of the flexibility of interest rates in it. Users can choose between the fixed type and the variable type.
Apart from what naturally attracts investors to Compound, Aave even has extra features that draws investors. For example, users can take loans without collateral or with collaterals that are quite distinct from the norm. Flash loans and the ability to “switch rates” are other reasons to do all your transactions on Aave.
Aave has a native token called LEND, which it uses to provide peculiar services to its users such as discounted fees. Very soon, LEND will be a staking instrument for governance and will be considered by Aave for loan repayment.
Aave’s performance in this year 2020 has been outstanding. Aave Watch recorded most of the achievements, including what their fees have been like. Another one like it is Aave Burn but this one is a more useful resource to know how protocol fees were spent in an attempt to burn some LEND that needed not to exist in the open market.
Aave Lending Rate
There are different lending rates for several tokens on Aave. Some are high while some are as low as 0%. Examples of tokens with 0% lending rates include LEND and MANA, while others at interest rate less than 1% are ZRX (0.01%), YFI (0.06%), WBTC (0.01%), TUSD (0.17%), REP (0.02%), MKR (0.04%), LINK (0.19%), and ENJ (0.04%). There are up to 20 tokens to lend on Aave.
Aave was first known as ETHLend when Stani Kulechov established it three years ago for lending purposes.
Towards the end of that year, the firm organized an ICO in which it realized Ethers equivalent to $600,000 when it gave out 1 billion of its native tokens.
In September 2018, ETHLend became known as Aave. The aim was to add more services to its existing users and millions of others that were yet to come.
Aave has the highest number of DeFi collaterals to lend than any of its counterparts. Its liquidity is high and smart contract investments are insured by Nexus Mutual. Aave has contributed more than most others in the DeFi market this year.
One of the features that made Aave so popular is the Flash Loans it offers. This is most likely because it requires no collateral.
With Flash Loans, beneficiaries don’t use collateral but they have to repay within the time that was agreed. Not paying the loan within the stipulated time would result to its failure.
Getting flash loans from Aave is simple once you are willing to pay 0.30% fee. Aave enjoys this although it is small because a lot of people ask for it.
Investors who are looking for arbitrage opportunities without paying much can do so with Aave’s flash loans.
Aave has also gained the hearts of many DeFi investors by offering them the opportunity to choose their interest rates anytime. This is unlike the norm where lending platforms mandate users to use a particular interest rate continuously. With the possibility of choosing their rates, they are offered the best packages in the market
Aave’s improved modality for calculating interest rates has driven wider adoption of its stable rate loans which took effect around May this year. Another advantage with Aave is the interchangeability of its rate because it helps to give more profit to the user.
Steadying the rate on Aave doesn’t mean it is fixed. The implication is that what is offered does not easily change because of market forces.
Apart from the popular DeFi tokens such as ETH, USDC, and DAI, users transacting with Uniswap LP tokens, TokenSets and other tokens that require fees will soon be able to cancel open positions that are borrowed. The implication is that users can pick a loan to replace a position that is already giving profits and still have the chance to renter them to benefit from crypto lending and borrowing.
How to give
First things first, visit the Aave’s site. There is need to join with a web 3.0 wallet which includes Metamask, Fortmatic, and Coinbase Wallet.
Depositing can be done with a variety of assets and there are no fixed amounts you must lend. Once you have made up your mind, allow Aave to have control over the asset you chose and give your final approval.
Once the deposit is successful, it will appear in the lending pool and you will qualify for interest which can be seen anytime on the dashboard as they accumulate.
Contributors of funds to Aave’s lending pool get aTokens in return. The aTokens is like the cTokens offered by Compound Finance, which serves as a proof that the contributor is qualified for interests that is proportional to what was deposited.
The difference between cTokens and aToken is that aToken’s value does not change when compared to its primary asset. For example, a lender who gets aDAI token will be compensated based on the value of the DAI token. So when aTokens increase in value, the lender’s amount of the token given will increase correspondingly and not just the interest as is the case with cTokens.
Always remember that every asset has its own requirement for collateral and this is because price volatilities are not the same. Many people like lending stablecoins because their price is stable and this has caused it to have the best loan-to-value ratios.
Aave’s flexibility on interest rates is second to none. One can choose to work with a stable rate this minute and a variable rate the next minute. There is no limitation on how often they should do it.
Making a purchase
To make a purchase with Aave, users in Europe can spend from their cryptocurrency wallet to buy daily needs in fiat currency.
It is also possible with Aave to collect a loan and withdraw local currency from any bank without going through the process of converting cryptocurrencies.
However, this is only possible presently with the Euro.
About Aave’s token
The native token of Aave is called LEND. It is an ERC 20 type whose supply is approximately 1.3 billion. One million of the tokens have been sold in an ICO.
The LEND token was first created and used in the days of the ETHLend platform. Users loved it because they were able to get discount on fees, more benefits on staking, and better loan-to-value ratios.
But when ETHLend gave way for Aave, the LEND token became more useful so presently, it can also be used for platform governance in preparation for a higher scale of decentralization.
People that have LEND can take decisions with top officials in Aave. For example they can say their mind on what should happen when the development team needs opinions. They also have a say on some economic decisions such as interest rates and procedures for liquidating assets.
At the moment, Aave spends four-fifths of the platform fees to take away LEND tokens from the open market. The implication is that the amount available for supply will fall and if demand is maintained or increased, the price of LEND will surely rise.
Soon, LEND’s usefulness for protocol governance will be markedly high and this will be achieved by making it important for staking. When borrowers are unable to repay, their LEND tokens can save them because they can be exchanged for protocol fees.
To know more about Aave or join the protocol, you can check Twitter or discuss it with others on the Discord community.
To read interesting articles about it, you can as well proceed to Medium