Revolutionizing the traditional financial system: What is AAVE?
Cryptocurrency adoption is on the rise and financial institutions are starting to realize that they must integrate with this new technology or face their certain demise. Their biggest competitor is DeFi and demand for this crypto niche from both, retail and institutional investors has been high. AAVE has been leading the charge in this regard and the release of its institutional borrowing and lending platform is only the start. 🏁
What is AAVE?
You know when you're getting ready to buy your first home? Well, for most people you definitely need a mortgage. You make a down payment of 20% to be able to take out a loan for the other 80% and then pay it off. The money to buy the house comes from the bank. They lend the money, knowing that you will pay interest, and they give that interest back to their lenders. Essentially, AAVE is a cryptocurrency version of that bank. 🏦
The AAVE network is a decentralized finance (DeFi) protocol that allows people to lend and borrow cryptocurrencies and real-world assets (RWAs) without having to go through a centralized intermediary. When they lend, they get interest; when they borrow, they pay interest.💱
**Fun Fact: **
- The word Aave means "ghost" 👻 in Finnish. The name reflects the main goal of the project - the creation of a transparent and open credit infrastructure using distributed ledger technology.
How does AAVE work?
Users are divided into borrowers and lenders. Lenders contribute assets to the liquidity pool 🏊 and begin to earn interest proportional to the interest rate of the asset supply. Let’s say you are a USDT liquidity provider then the interest drips into USDT.
For a borrower to take the right asset from the liquidity pool, they need to leave some asset (ETH, MATIC, etc.) as collateral. You should always leave more than the loan amount as collateral - a similar over-collateralization allows AAVE to always remain solvent.
The interest rate for lenders and borrowers is determined automatically. For borrowers, it depends on the availability of funds - the total amount of funds present in the pool at a certain time; and for lenders, it corresponds to the rate set by AAVE and is tied to algorithms that ensure stable withdrawals at any given time.
What tokens does AAVE use?
AAVE issues two different tokens. The first type is called aTokens, which are issued to lenders so that they can earn interest on their deposits.
The second type is called AAVE. AAVE serves more than one function and works like several other types of cryptocurrencies, being both an utility token and an exchange token that offers users discounts on fees within the AAVE protocol. Holders of this token can vote for proposals 🗳️ or act collectively as managers 👨💼 of the protocol.
In short, the idea of this token is that token holders get to vote on changes to the application as time goes on. Each AAVE token equals one vote.
What are the features of AAVE?
True decentralization: As a decentralized platform, AAVE users retain full custody and control over their cryptocurrencies.
AAVE Token: The AAVE token offers various benefits to holders. For example, people borrowing the token won't have to pay a transaction fee when receiving a loan in denominated tokens. In addition, borrowers who exclusively use AAVE as collateral also receive a discount on transaction fees.
💸 Flash loans: Flash loans are one of AAVE’s major advantages - particularly because they require no collateral. Rather than guaranteeing repayment with collateral, flash loans rely on the maturity of the loan. If the loan is used and repaid in full during the same quarter in which it was originated, it is approved. On the other hand, if the loan is not repaid in the same block, the entire transaction fails.
Margin Trading: With Margin Trading, users can directly take long and short positions on any of the assets supported.
Flexible rates: Other lending platforms typically lock users into stable or variable interest rates, but AAVE offers a rate switching feature that allows users to switch between two different types of rates. This allows users to get the best interest rate on their loans by choosing between "stable" and "variable" interest rates.
Repay with collateral: The latest version of the AAVE protocol also allows users with one of many assets deposited as collateral in the protocol to use them to repay their loans in part or in full.
Fully transparent management: AAVE took the time to fully explain the ecosystem, tokenomics, and governance associated with the platform. This open-source approach is intended to generate a higher sense of trust in the community, and it is a solid precedent for other decentralized platforms. It is also proof that AAVE is not only focused on liquidity, but also on providing strong reserves.
AAVE in the Market Today
AAVE is currently valued at $96.78, close to its ever-so recent high of $108. It is currently up 6.7% in the last 24 hours, and a whopping 17.5% in the last week! It is now 111% up since its low of around $45 from the middle of June, the crypto slump.
Part of its recent growth has been due to the proposal to launch a local crypto-based stablecoin called GHO, which managed to gain 99% of votes in favour of this proposal via governance. We also see on-chain activity from ‘IntoTheBlock’ for AAVE showing that it is on an uptrend as daily active addresses have reached yearly highs.
For more upside potential, we have resistance levels of around $99 and if we are to see further downsite movement, then the next support is at around $92.
Is AAVE a good investment?
Investors who believe decentralized lending will continue to grow may find AAVE attractive.
Owning AAVE gives users special privileges on the AAVE platform, as noted above, including transaction discounts and fees; and because Aave is one of DeFi's largest lenders, AAVE has high liquidity.
In terms of stability, durability and commitment to innovation, the AAVE platform continues to be one of the largest in the DeFi space.
Nevertheless, investing in cryptocurrency requires an in-depth understanding of how different platforms, tokens and coins work, as well as the potential risks. While AAVE offers many opportunities for investors and traders, there are no guarantees of positive results given the volatility of the crypto space.
At the time of writing, AAVE is ranked fourth by DefiPulse. The idea of peer-to-peer lending to individuals with full anonymity is very promising, especially in today's realities. And the AAVE platform provides a ready-made solution.
AAVE at NAGAX
If you are interested in the new sector of crypto lending and borrowing, you may be wondering where to buy AAVE. NAGAX is the answer! Our secure and convenient platform is the perfect place to buy cryptos with a variety of payment methods.
Here are 3️⃣ easy steps to buy AAVE on NAGAX:
- [Sign up](That’s it - you’re all set! 🤩) for a NAGAX account.
- Buy AAVE instantly with a Debit/Credit Card or USDT through the intuitive NAGAX Wallet or Exchange.
- That’s it - you’re all set! 🤩
When it comes to buying crypto, you have a lot of options. You can directly purchase $AAVE with a credit/debit card or other cryptocurrencies (USDT, BTC) in the NAGAX Wallet. To learn more about buying crypto at NAGAX, please click here.
Discover AAVE at NAGAX today! 🚀
- AAVE is a DeFi lending protocol that allows you to borrow and lend crypto assets using fixed and floating interest rates.
- AAVE is the native governance token of the Aave protocol. If you have an AAVE token, you can vote on the future of the project.
- Aave offers other noteworthy features such as uncollateralized loans, "rate switching," Flash Loan, and unique types of collateral.
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