Aave is a decentralized lending and borrowing platform. It was launched in January 2020 and allows users to lend, borrow and earn interest on crypto assets, all without the need for a centralized intermediary. When a user lends via the platform, they earn interest; and when they borrow, they pay interest.

Aave runs on the Ethereum, Polygon, and Avalanche blockchains, and functions as a system of smart contracts that enables assets to be managed by a distributed network of computers running the Aave software.

AAVE is the platform’s native token.

What are AAVE key features and how does it work?

Users can deposit digital assets into "lending pools," which become funds that the protocol can lend out. At present, there are more than 30 pools for Ethereum-based assets on the Aave platform, including stablecoins such as Tether, DAI, and USD Coin. As well as lending pools for other cryptocurrencies including ETH, BAT, and MANA.

Users who deposit tokens into a pool and provide liquidity, receive aTokens in return. For example, if you deposit ETH to the liquidity pool, you'll receive aETH in return.

Aave borrowers must provide collateral in order to borrow from the platform. They can also only borrow up to a certain percentage of the value of the collateral they provide. To account for the volatility of the crypto markets, the Aave protocol has an algorithm that automatically liquidates a borrower’s collateral if its value falls below a specified ratio.

Aave makes use of what it calls “health factor”, this is how safe a loan is. It is calculated as the proportion of collateral deposited vs the amount borrowed. A health factor above 1 is generally needed to avoid automatic liquidation.

Interest rates vary depending on what you're borrowing or how much liquidity a pool has that you are lending to.

What can Aave be used for?

As mentioned, the Aave platform is for borrowing and lending. As such investors can deposit their stablecoins in the platform to earn interest with much more attractive rates of return than traditional savings accounts. Likewise, borrowers can lend against collateral that they have deposited.

The Aave platform also allows “flash loans”. Flash loans are loans that are being borrowed and repaid within the same block. These are specific types of loans that are almost instantly issued and settled. These loans require no upfront collateral.

A borrower can request funds from Aave, but they must pay back those funds, and a small fee, within the same block. On the Ethereum network, this is within a 13 second period. If the borrower doesn’t do this, the entire transaction is canceled, so that no funds were ever borrowed.

Also, using the AAVE token on the blockchain comes with several advantages. This includes discounted transaction fees for users that submit AAVE as collateral, and users that borrow AAVE are not charged any fees. AAVE holders are also entitled to certain governance rights, this depends on the amount of AAVE held.

Where can you buy AAVE?

Aave is available to trade or buy on a number of different centralized and decentralized exchanges, including Binance and Huobi Global. For a full list of available exchanges see here.