Known to be an Ethereum-based token, AAVE has become a popular option for investors.
However, what is AAVE, and what services does its platform offer?
Leave it to Bitkub Academy to answer your queries in this educational article about AAVE, a token on the Bitkub exchange!
What is AAVE?
Aave (AAVE) is a Decentralized Finance (DeFi) platform offering crypto lending services for users in a decentralized manner, without a central authority.
Whereas, the AAVE utility token is an ERC-20 token with the main usages of providing fee discounts for its users, as well as being a governance token for its holders to help govern the platform in a decentralized and sustainable manner.
Aave, initially called ETHLend, was established in 2017 by Stani Kulechov, but found a lack of lending platforms on the Ethereum blockchain, resulting in the founding of Aave, in 2018.
AAVE is a token situated on the Ethereum blockchain system that functions through smart contracts that facilitate transaction processing when lending and borrowing funds, much like a traditional contract where organizations would govern a system, while also cutting in through costly fees and slow processing.
An interesting piece of technology on the Aave platform is flash loans, which allow immediate borrowing of funds that are also expected to be returned just as fast, but with interest fees for the lender included. With Aave offering lending services, the platform has effectively filled in the missing puzzle in the DeFi ecosystem by meeting the needs of users with desire to create immediate profit and revenue.
On the same premise, the aforementioned lending services’ fees can also be swapped between stable and fluctuating rates, wherein stable rates will provide users with assurance of their initial costs, in accordance with the volatility of the cryptocurrency market. Whereas fluctuating rates can be risky, however beneficial in certain situations, such as when borrowers predict correctly that the invested asset would decrease in value in the team of lending.
Aave’s system relies on the Ethereum network’s Proof-of-Stake consensus algorithm, allowing the platform to have the first protocol facilitating lending services through encryption without a central authority or the need for additional documents and procedures, like KYC (Know Your Customer) or Anti-Money Laundering (AML).
In addition to the platform’s lending-enabling protocol, Aave also allows users to create decentralized marketplaces of their own through the usage of smart contracts on the Ethereum network, further creating flexibility for Aave, and, as a result, increased popularity as well.
In reference to statistics from Coinmarketcap on October 18, 2021, AAVE is ranked as the 44th highest in terms of market capitalization, with around 3.9 billion U.S. dollars or around 133 billion Thai baht. AAVE’s maximum supply is fixed at 16,000,000 AAVE with a current 13,213,514 UNI in circulation.
Additionally, AAVE is hovering around the price of 10,101 baht at the time of writing.
All in all, AAVE is a utility token with the ERC-20 standard, functioning on the Aave platform by providing digital asset lending services to facilitate flash loans. Aave is amongst the first platforms to enable lending services on DeFi, making it one of the most popular and liquid among all DeFi products.