Aave (AAVE) – All you need to know

What is Aave?

Aave is a cryptocurrency lending platform and AAVE is the platform’s governance token. It utilises lending pools so users can borrow, deposit, repay, redeem, flash loan, or swap a variety of cryptocurrencies. Aave runs on top of the Ethereum blockchain and is now one of the largest Ethereum lending systems, with users being able to lend and borrow money directly from other people via peer-to-peer connections without the need for a middleman.

A Swiss company, Aave was founded in 2017 by Stani Kulechov. It raised $16.2m in an ICO (initial coin offering) and was originally named ETHLend using the LEND token for governance. The firm eventually changed the name of its governance token to AAVE. There are rival cryptocurrency lending platforms, such as CoinLoan, but Aave aims to set itself apart by making instant loans and new debit/credit formats accessible to all. Having compiled $158m in total deposits so far, it has grown rapidly.

How does Aave work?

Aave allows users to loan and borrow money using lending pools. Lenders deposit funds into each pool, and borrowers can draw from them for loans, which are reinforced by the security of a smart contract. Aave allows flash loans to be taken out quickly and securely by users; blockchain technology can verify transactions quickly rather than conventional bank loans that rely on a middleman who may take weeks to respond to your loan request.

Borrowers post collateral, and borrowing limits are set at the amount of collateral posted. To incentivise lenders, they are able to redeem interest on deposits. The lending experience is seamless for users because they can post collateral and gain exposure to completely different cryptocurrencies without owning them outright. For example, users can post collateral in Basic Attention Tokens but borrow in Ethereum.

Users who borrow AAVE are not charged a fee for loans denominated in AAVE, and borrowers who use AAVE as collateral are able to enjoy a discount on fees and an increased borrowing limit. For more on the basics of cryptocurrencies, read our introduction to cryptocurrency.

Fact-checking & references

Our editors fact-check all content to ensure compliance with our strict editorial policy. The information in this article is supported by the following reliable sources.

Risk disclaimer

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >