Investing in Aave (LEND) – Everything you Need to Know
Aave is more than just another DeFi protocol on its way to the top. It is an innovative money-lending platform in the crypto space that uses radical reinventing and unique features to stay in the spotlight.
Decentralized Finance (DeFi) is a new and promising development within the cryptocurrency universe. It gives people more power over their assets and takes blockchain adoption a step closer to completion.
Spearheading this financial revolution is a number of money market protocols that are surging in value as we speak. One of them is Aave and its native token LEND, and the first platform of its kind to allow users to borrow cryptos without depositing collaterals for them.
This beginner’s guide to Aave and LEND should give you a clear idea about one of the most used DeFi protocols of 2020!
Aave in a Nutshell
- Aave is a decentralized money market protocol
- Aave was launched in 2017
- Aave is developed on top of the Ethereum blockchain
- Aave has a native token called LEND
- Aave enables users to access lending pools without offering collateral for their loans
- Aave allows borrowers to switch between fixed and variable interest rates
- Aave is available to buy on most of the major crypto exchanges
- Aave can be stored in Ethereum-compatible wallets
What is Aave?
On Aave, participants can provide liquidity to lending pools on the protocol and gain interest. Other users can access over-collateralized loans from the same pools. The deposits are tokenized as aTokens, and they accumulate interest in the long run.
Aave has big plans for the future, including the introduction of liquidity mining and staking rewards for users who lock up assets in the protocol’s native tokens, LEND. The staked tokens will provide the last resort collateral in case the platform crashes.
For now, the Aave platform embellishes the DeFi ecosystem with nifty features like uncollateralized loans and rate switching.
What is LEND?
LEND is the ERC-20 standard token native to the Aave protocol. LEND token holders get the right to vote on proposals from Aave’s team of developers.
LEND is periodically burned to prevent inflation and increase its value over time. More than 80% of the platform fees are frequently burned on the open market for this purpose.
In the future, Aave plans to increase the staking ability of users who’ll then get to participate in protocol governance as well as have a claim in exchange fees in exchange for helping secure the Aave network against malicious borrowers.
Upon its release, the distribution of LEND tokens included:
- 30% to core developers
- 20% reserved for the user experience development
- 20% reserved for management and legal
- 20% reserved for promotions and marketing
- 10% result for unexpected costs
At the time of this writing, LEND is trading for about $0.55, and it has a market capitalization of $749,870,459. There are over 1,299,999,942 LEND tokens in circulation as of September 2020.
A Brief History of Aave
Aave was developed in 2018 by seasoned entrepreneur Stani Kulechov out of the remnants of his previous project ETHLend. The former was a crypto lending platform established in 2017 that managed to raise almost $600,000 worth of Ether in exchange for 1 billion LEND tokens.
The 2018 rebranding that the project went through saw ETHLend transform into Aave and provide many more features rightly adjusted to the emerging DeFi market.
The new denomination, Aave is the Finnish word for “ghost,” and it summarizes the platform’s ambition to provide a transparent and open infrastructure for decentralized finance.
The team behind Aave bursts with experience in the cryptocurrency space. Some of the most important names in the team include:
- Stani Kulechov (CEO)
- Jordan Lazaro Gustave (COO)
- Nolvia Serrano (CMO)
Since its release, Aave’s LEND has stayed mainly in the shadows of the DeFi market, trading just below $0.1 for most of its existence. The DeFi boom of summer 2020 brought Aave to the attention of investors everywhere, and its price skyrocketed to reach $0.9 at the end of August 2020. At the moment, LEND is ranked among the top-30 crypto assets by market capitalization.
How does Aave work?
Similar to other money market protocols, Aave enables users to borrow and lend assets on the DeFi market. Lenders can use the capital to fund their projects, and borrowers can gain interest on their tokenized deposits in the long run.
However, Aave is more than just your regular decentralized, open-source protocol, and it brings new and unique features to the table, such as:
This feature enables loaners to access deposits from the lending pool without presenting collateral for them. Instead, the protocol uses the timing of the loan’s repayment to make sure that the loan is paid back.
Flash loans work by borrowing and returning the loan plus a small interest in the same transaction. Participants can use them to profit from the difference in price for the same asset from one exchange to another.
Additionally, users can employ flash loans to refinance the debt or to swap collaterals without having to repay the debt of the loan position.
Contrary to the other money market protocols, Aave allows users to choose between fixed or variable interest rates.
Aave users can switch between stable or variable rates depending on the volatility of the asset that they are borrowing. For high-interest rates, a borrower may choose the stable rate, which is not necessarily fixed, but rather more resilient to price swings.
On the other hand, a loaner that opted for a highly-volatile asset can go for variable rates to reduce loss in the long-term.
Where to Buy & Store Aave
Aave is available to buy from a wide range of crypto exchanges that include:
Because it is an ERC-20 token, you can store Aave in any Ethereum-compatible wallet, such as:
Aave may seem like a new addition to the DeFi space. However, behind it is a team of highly experienced developers and crypto entrepreneurs. Unique and radical features like flash loans and rate-switching options show that the project is only beginning to remodel money market protocols and the financial world altogether.