AAVE

Aave is a decentralized finance protocol that enables lending and borrowing of crypto assets. Built as an open, non-custodial platform, it operates via smart contracts on blockchain networks. The project originated from the later ETHLend platform and was rebranded as Aave. It supports liquidity providers who deposit assets into pools and borrowers who borrow against collateral. Aave is known for introducing features such as flash loans and for offering multiple asset markets.

How it works: Users deposit assets into liquidity pools and receive interest-bearing aTokens that accrue value over time. Borrowers can take loans by supplying collateral; the amount they can borrow depends on collateral value and the protocol’s loan-to-value limits. Interest rates can be variable or stable, depending on market conditions. A health factor system monitors loan positions to prevent liquidation, and liquidations occur when health factor falls below a threshold.

Features: Flash loans allow borrowing without upfront collateral within a single blockchain transaction, provided the loan is repaid before the transaction ends. The protocol supports multiple markets and deposits by users and uses on-chain governance for protocol updates.

Token and governance: The platform uses the AAVE governance token for voting. In 2020 the original LEND token was migrated to the AAVE token at a 100:1 ratio, consolidating governance and staking rights. The Safety Module allows AAVE holders to stake tokens to provide a backstop fund in case of shortfalls, subject to penalties.

Availability: Aave operates on Ethereum and has deployments on multiple networks via Aave V3, including Polygon, Avalanche, Arbitrum, Optimism, and others, enabling cross-network liquidity and reduced fees.

Overview: Aave is one of the leading DeFi lending protocols, widely used for supplying liquidity, borrowing across assets, and participating in decentralized governance.