When the ETHLend platform significantly improved its functionality, it rebranded and got the name of the parent company Aave in September 2018. The main goal of this project is to build an open and transparent ecosystem with easy services to help people enjoy the benefits of decentralized finance. Its non-custodial protocol was launched on the Ethereum mainnet in January 2020 and brought multiple innovations to the DeFi space.
The Aave team changed its strategy from decentralized P2P lending to pool-based one, which makes earning interest on deposits and borrowing assets easier and quicker. There is a pool contract where users can deposit cryptocurrencies and borrow funds perpetually or in a one-block liquidity way. Since loans depend on the amount of funds borrowed and the size of the collateral, they do not need to be individually matched, so they become instant.
What makes Aave protocol unique is that it allows users to earn interest in real-time because deposits are tokenized as Aave interest-bearing tokens (shortly aTokens) pegged at a 1:1 ratio to underlying assets. Interest is also paid in aTokens, but they are converted back to the asset when lenders withdraw their funds.
Another unique feature is flash loans designed for developers who need funds for different purposes while building new tools. They allow users to borrow cryptocurrency instantly without any collateral. It is, however, obligatory to borrow, use, and return funds within the same transaction. The deal is canceled if the borrowed funds are not returned within the block time.
In spite of that, this outstanding peculiarity drives the usage of the protocol more than anything else. It makes a big difference for those who want to extract profit-making opportunities within DeFi, and can be used for a variety of purposes, from collateral swaps on Maker to a loan refinancing via dYdX, an open trading platform for crypto assets, and Compound, an interest rate protocol for developers.
One more outstanding feature of Aave is rate switching. It allows borrowers to switch between fixed and floating interest rates in order to decrease their borrowing costs and always works in the borrower’s favor.
All these features including the fact that at the time of writing Aave protocol operates with 16 different assets, make it the most diverse lending pool in the ecosystem.
The platform provides users with different products covering such industries as technology, finance, and games. They include EthLend, Aave Lending, Aave Pocket, Aave Pay, Aave Clearing, Aave Custody, and Aave Gaming.
EthLend is a peer-to-peer lending marketplace running on the Ethereum blockchain, which uses digital tokens as collateral. If users need money, they take a loan, putting their crypto as collateral, get the liquidity in digital assets, transfer these assets to the IBAN account using Aave Pay and get fiat money.
Aave Lending is an efficient SaaS solution for the collateralization of loans. It makes asset-backed lending business easier for creditors taking care of secure collateral storage, notifications, and liquidation upon margin calls.
Aave Pocket is an account innovation, which erases the need for credit cards and bank-to-bank fees. All transactions stay within the application. It allows users to store holdings, deposit funds into DLPs and convert drawn funds to their bank accounts.
Aave Pay is a service that allows users to take a loan at EthLend and directly send it to their bank account or to cash out their crypto to pay everyday expenses. This is an attempt to make use of crypto as a real currency for adopters. It also gives European users the opportunity to pay in fiat using their preferred cryptocurrency.
Aave Clearing is a clearing service for businesses and investors who need to convert large amounts of cryptocurrency quickly and efficiently. The platform helps them to generate quote requests and exchange their cryptocurrencies.
Aave Custody stores digital assets for investors. It is a custodian that follows the highest security standards.
Aave Gaming developers aim to create a new gaming experience with the use of mixed reality, Blockchain and Smart Contracts.
Aave token LEND
Aave token LEND is in the center of the ecosystem. It is an ERC-20 compatible utility token accepted in all Aave products. Users can store it in any Ethereum-compatible wallet such as Metamask or MyEtherWallet. LEND has a total supply of 1,300,000,000 tokens. 1 billion of them were released for public sale and 300,000,000 LEND is held for the development fund.
The token has different utility functions. For one, it offers zero-fee lending with LEND. Then, it provides a 50% discount for fees while 20% of the collected fees are used to reward active users if LEND is used as collateral. If pledging LEND, the collateral value that users can borrow improves from 65% to 70%. Next, by sending LEND to the loan smart contract users can defend a collateral call. Another useful function is that lenders can purchase the preview feature with this token only and see the loans 60 minutes before the public. Loans featured on the front page can only be paid for with LEND as well. It is also worth mentioning that ETHLend does not take a 2.5% penalty fee on late penalties. Finally, 1 LEND equals 1 vote if you want to decide on future developments.
Aave team and partners
At the time of writing, there are 18 people behind this London-based company founded in 2017. Stani Kulechov is the founder and CEO of Aave. He is also the Advisor at Delta Exchange. He has extensive experience in cryptocurrencies, blockchain and fintech space.
Other team members include Emilio Frangella (a full-stack Blockchain developer), Paras Botadra (an IT professional skilled in developing highly integrated and proficient software solutions) and Andrey Kozlov (a full stack developer).
Among the strategic partners that Aave has gained so far are Sandblock, Eidoo wallet and Cashare, one of the biggest p2p lending platforms.