Buy Aave in Australia on CoinJar
Aave
AAVE
Overview
What is Aave?
Buy Aave: Why do investors buy Aave? On Planet , Aave is an interesting decentralised lending platform that is worth investigating. So here’s the skinny on what you can do on the protocol.
emerged from the brain of Stani Kulechov, who founded a venture called ETHLend in 2017.
Inspired by Ethereum’s capabilities, Kulechov aimed to create a peer-to-peer lending and borrowing platform.
In January 2020, he rebranded ETHLend as Aave and launched it on the Ethereum mainnet. Since then, Aave has expanded to other blockchain networks, including Avalanche, Fantom, Harmony, Arbitrum, Polygon, and Optimism.
What you can do on the platform
Decentralised lending
The platform allows users to lend and borrow digital assets without intermediaries like banks. It’s a trustless system where smart contracts handle transactions transparently.
Liquidity pools
Users deposit into liquidity pools. These pools serve as the source of funds for borrowers. Lenders earn interest by contributing to these pools.
Flash loans
Flash loans are a unique type of loan available on the platform.
Flash loans are lightning-fast loans that don’t require any collateral. Unlike traditional loans, where you need to put up assets as security, flash loans allow you to borrow without providing collateral upfront.
The catch is that you must repay the entire loan amount within the same transaction. If you fail to do so, the entire transaction is reversed, and the loan is canceled. This tight timeframe ensures that flash loans are used for specific purposes and don’t linger indefinitely.
Flash loans are popular among traders and arbitrageurs. They can borrow funds instantly, execute profitable trades across different platforms, and then repay the loan — all within a single transaction. For example, if there’s a price discrepancy between two exchanges, a trader can exploit it using a flash loan.
By eliminating the need for collateral, flash loans free up capital that would otherwise be tied up. Traders can leverage this efficiency to maximise their profits.
The native token (AAVE)
AAVE is the native governance token. Holders can participate in decision-making and propose changes to the protocol.
How Aave works
Deposits and borrowing
Users deposit their crypto assets (e.g., ETH, stablecoins) into the liquidity pools. Borrowers can then take out loans by collateralizing their assets. The interest rates vary based on supply and demand.
Interest rates
The dynamic interest rates adjust in real-time. Users can choose between stable or variable rates. Stable rates provide predictability, while variable rates respond to market conditions.
Collateralisation
Borrowers must over-collateralise their loans. If the value of their collateral drops, they risk liquidation.
Governance
AAVE holders participate in governance proposals, voting on protocol changes, and deciding the platform’s future.
What Aave is aiming to do
Financial inclusion
The platform aims to democratise access to financial services. Anyone with an internet connection can participate, regardless of their location or background.
Earn interest
Lenders earn interest by providing liquidity. It’s a way to passively grow your crypto holdings.
Flash loans
Aave’s flash loans are used mainly by developers and traders, enabling complex strategies and efficient capital utilisation.
DeFi innovation
Aave’s success has inspired other DeFi projects, contributing to the broader ecosystem’s growth.
Conclusion
Aave is more than just a lending platform; it’s a catalyst for financial innovation. Exploring the platform can deepen your understanding of blockchain, DeFi, and the future of finance.
Cash, credit or crypto?
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What is the Aave protocol?
It is an open-source liquidity protocol designed for creating non-custodial liquidity markets. It allows users to earn interest by supplying assets and borrow crypto assets with either a variable or stable interest rate. Aave is a decentralized platform.
It is easily integrated into various products and services.
What does “Aave is decentralised” mean?
The platform operates without central authorities or intermediaries. Users can lend and borrow cryptocurrencies directly, without relying on traditional banks or financial institutions.
What are Aave tokens?
They are an essential part of the ecosystem. They serve multiple purposes:
Governance: Token holders participate in decision-making by voting on improvements.
Safety Module: They can be staked within the protocol’s Safety Module, providing security and insurance to the protocol and suppliers.
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