💡 What Is Aave?
Aave is a decentralized finance (DeFi) protocol that allows users to borrow and lend cryptocurrency assets without intermediaries (such as banks or traditional financial institutions).
The name “Aave” comes from Finnish, meaning “ghost” — symbolizing transparency and invisibility in the financial system.
Originally launched as ETHLend in 2017, it rebranded to Aave in 2020.
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🏦 How Does It Work?
Aave is a lending platform based on smart contracts on the Ethereum blockchain (and now also multichain).
🧑💼 Users can:
Deposit assets into the liquidity pool → and receive interest as a “lender.”
Borrow assets with other crypto collateral, and pay interest.
Example:
You deposit USDC → you will earn interest (e.g., 5%).
You want to borrow ETH → you must collateralize with other crypto (e.g., deposit 150% of the loan value in DAI).
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🔧 Aave's Key Features
Feature Description
Flash Loans Instant loans without collateral, but must be paid in 1 transaction (widely used for arbitrage and liquidation)
Stable & Variable Rate Can choose fixed or variable interest rates
aTokens Tokens you receive when depositing (e.g., aDAI) that immediately accumulate interest
Multichain Supports various networks: Ethereum, Polygon, Avalanche, Optimism, Arbitrum, Fantom, and others
GHO Stablecoin New stablecoin from Aave that will be issued with collateral
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📈 AAVE Token
Token name: AAVE (formerly LEND)
Token functions:
Governance (token holders can vote on protocol decisions)
Staking (to provide security collateral for the protocol → can earn rewards)
Used to pay part of the fees and protection within the security system.
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🧠 Why Is Aave Important in the Crypto World?
Aave is a pioneer in DeFi because:
It promotes the concept of flash loans, which is entirely new in the financial world.
It represents the principles of self-custody & trustless finance (without third parties).
