I first heard about AAVE when my fellow author, CryptoTjark, commented that he was staking his USDT winnings on AAVE. Coincidentally, it was around the same time when Gemini Exchange released an explanatory guide to AAVE on its Telegram channel. So it seems that AAVE was rising in popularity, hence my decision to spend some time understanding it. Here is what I found out:
1) AAVE means "ghost" in Finnish. It is said to be named so because it promises to intrigue users through its evolving and imaginative technology. However, because it allows users to lend and borrow crypto assets from each other without the need for middlemen, I like to think of this platform as stealthily as a ghost.
2) AAVE's founder, Stani Kulechov, started out in 2017 and established a company called ETHLend, which ran on the Ethereum platform and allowed users to use ERC20 LEND tokens as collateral to borrow ETH. When ETHLend revamped its processes to empower users to make use of "flash loans" without submitting collateral beforehand, it rebranded itself as AAVE. These flash loans employed smart contracts, allowed users to borrow from the reserve pools and then paid back the loan plus interest - all within just one transaction.
3) Flash loans require users to possess technical and specialised knowledge as they need to set up a smart contract that facilitates this borrowing and lending of digital assets. Fortunately, for the most of us, we can still make use of AAVE by depositing our funds into liquidity pools, from which borrowers take their loans from. This is how we get to earn interest through our funds. Now, you must be wondering how many cryptocurrencies are available for borrowing and lending. According to the website, it seems that a whooping 31 cryptocurrencies are available (yes I counted!), including our beloved AMPL token.
4) A question on my mind was the difference between AAVE and cryptolending platforms like Celsius and Hodlnaut. I have since learnt that Celsius and its counterparts are known as Limited Liability Companies, which are governed by a managing director and his management team. Hence, when we deposit our digital assets, we have to trust that these firms will always act in our interests. AAVE, on the other hand, is a Decentralised Autonomous Organisation. Nonetheless, we can trust AAVE with our hard-earned money because its smart contracts are open-source and thus, available for scrutiny!
5) This also means that while we need to undergo KYC verification before we can make use of the services of Celsius and Hodlnaut, we do not have to reveal our personal particulars with AAVE. Borrowing and lending of cryptocurrencies with AAVE is completely anonymous - a definite plus point for people who are keen to protect their personal data as much as possible in a world teeming with scammers.
6) What I found attractive about AAVE was how it lends users a voice. Should you own AAVE tokens, you will gain the chance to vote and decide on the outcome of AAVE Improvement Proposals (AIPs). What a great way to increase user engagement and solicit authentic feedback for areas of growth!
7) AAVE's website states that there is no downloadable mobile application available. But if you read this article written by my mate, CryptoTjark, it appears that a mobile app is currently in the midst of development - both Android and iOS versions. It seems that this app was unanimously approved by users - an encouraging sign of how consumer buy-in was authentically sought and obtained by the developers.
8) Keen to make use of the AAVE protocol? If your Ethereum-backed assets are stored in either a MetaMask wallet or Coinbase wallet, connect it to the Avalanche Bridge to deposit them safely and quickly on the AAVE protocol.
Are you a fan of the AAVE protocol? Or do you use other protocols like Anchor and Curve?