Aave is an open source, unmanaged money market platform that offers a variety of debt-based products in a decentralized manner. Aave is an open source, unmanaged money market platform that offers a variety of debt-based products in a decentralized manner. The AAVE token is an Ethereum-based ERC-20 asset used as a governance token for the AAVE blockchain protocol. AAVE token holders have the ability to propose changes and vote to approve or reject new proposals to the AAVE agreement. With a large enough distribution, AAVE tokens are designed to eventually accommodate the autonomous and decentralized governance of the AAVE platform.

Create a fully decentralized money market that anyone can use to earn interest on deposits or borrow assets.

At present, the capital utilization rate of decentralized financial lending market is low and liquidity is poor. AAVE will try to introduce decentralized lending pool to solve the inefficient problem of peer-to-peer matching between lenders and borrowers.

The user (depositor) will deposit the crypto assets held in the lending pool to provide liquidity, and will get atoken certificate in a 1:1 ratio, that is, deposit 100ETH and get 100 aETH. When the user returns atoken to the lending pool, he can redeem his assets and earn deposit interest. The borrower can deposit multiple mortgage assets into the loan pool, so as to borrow other assets. When repayment, if the borrowed token does not reach the settlement line, the loan and interest can be repaid. If the settlement line is reached, part of the mortgage assets will be liquidated. When users borrow money, they need to pay a certain proportion of borrowing interest and service fee.

Deposit: aToken in Aave represents the user's interest in the protocol. For example, if you deposit 1 ETH, you will get 1 aETH. And in Aave, both deposits and loans compound per second. After depositing the assets, you can enjoy the interest income. When you return aToken when you want to withdraw the assets, you can receive the total amount of the principal of the assets deposited plus the interest. (Currently supports 22 assets such as DAI, ZRX, TUSD, USDC, USDT, SUSD, BUSD, ETH, LEND, AAVE, UNI, YFI, REN, ENJ, KNC, LINK, MANA, MKR, SNX, REP, WBTC and BAT) When borrowing money, Aave offers a Variable or Stable APR. In general, the floating rate will be lower than the fixed rate. Aave allows users to switch between variable and fixed interest rates. When Aave borrows money, how much it can borrow is influenced by the Value of the mortgage asset, and it has a mortgage factor, which is called loan-to-value in Aave. For example, DAI has a 75% collateral factor, which means that for each DAI, only 0.75 of the DAI value can be lent out. Liquidation: Due to the large number of assets supported by Aave, some assets are only deposited and lent, which cannot be used as collateral. And each asset has a different liquidation line. When the user's asset is about to be liquidated, the liquidator will repay part of the asset token lent by the user and get the user's collateral after converting it into a discount price. Different collateral will be liquidated at different discounts. Each liquidator can only help the loan user to repay 50% of the loan at a time, until the borrower account of the loan being repaid is above the settlement threshold.

Community governance voting and so on.

Aave uses a system of excess mortgages and clearing to manage the debt in its system. By depositing tokens into Aave, you can provide liquidity to Aave's token pool, which triggers aToken's automatic minting. These ERC-20 tokens are tied 1:1 to the value of the underlying asset and are a requirement for the liquidity you provide. ATokens earns interest directly in the wallet in real time, which fluctuates with borrowing demand and liquidity supply.

AAVE tokens are built on the ERC-20 standard, and they are designed to be deflationary. If the DeFi agreement falls short, as a last resort, the collateral token will be used as collateral. In July 2020, Aave announced plans for a token exchange. This means that the 1.3 billion AAVE tokens in circulation will be converted into newly minted AAVE cryptocurrencies at a ratio of 1:100, creating a total supply of 16 million Aavs.

AAVE first proposed the concept of flash loan, and support fixed interest rate, floating interest rate and other lending products.

1. Mortgage Rewards: 685 Aavs are used daily to reward users of mortgage tokens, with 250,000 aavs allocated in the first year. 2. Liquidity mining awards: 685 AAVs are awarded to liquidity providers per day, 250,000 aAVs can be allocated in the first year; The Balancer AAVE/ETH pool also offers additional liquidity incentives. 3. Using ecosystem incentives in a security Module, Staking 25,000 AAVE chips further to reward the user who moves AAVE, which results in Staking Staking in the security Module's ecosystem incentives, Every user who automatically locks up AAVE gets a 1% bonus.

Aave has several unique selling points compared with rivals in an increasingly crowded market. During the DeFi boom in the summer of 2020, it was one of the biggest projects in terms of the total value of cryptocurrencies locked up in its protocols. The program allows people to borrow and lend about 20 cryptocurrencies, meaning users have more options. One of Aave's flagship products is the "Flash loan", which has been described as the first unsecured loan option in DeFi. There was one problem: they had to be repaid in the same transaction. Another big selling point is how those borrowing through Aave can switch between fixed and variable rates. While fixed rates can provide some cost certainty during crypto market volatility, floating rates may come in handy if borrowers think prices will fall in the near future.

Contract vulnerability risk; Liquidity risk (the risk of inadequate collateral rates; Too little liquidity); Prophet risk (Prophet cannot update price information due to network congestion or market crash; The prophet provided incorrect price information that led to liquidation.

Aave is certainly one of the DeFi protocols that has caught the attention of users and investors who recognize its potential. In addition, in December 2020, protocol developers released Aave V2, the second version of Aave, creating some very interesting use cases and features. DeFi is growing steadily, as evidenced by nearly 40 billion smart contracts, and Aave is one of the most important.