What is Aave?
Aave is a lending protocol that lets you earn interest on your assets. The interest comes from other people that use the protocol to borrow crypto. Aave is open-source and non-custodial. You can get started by downloading or opening Argent.
Why does it matter?
Aave lets you put your crypto assets to work for you. It's an easy way to earn interest on crypto while enabling others to borrow. Unlike traditional finance, it's accessible globally, open 24/7
Aave has over $65m worth of assets on its protocol (as of May 2020). This amount has grown by over $12 million USD per month on average since they launched in January 2020.
How can I use Aave with Argent?
- Open Argent
- Tap Invest
- Tap Aave
- Tap on the investment you are interested in - you can see the current rates here
- You will be redirected to the menu where you can follow on-screen instructions to Buy, Sell or Send your Aave assets.
How does it work?
Aave describe themselves as a "decentralized non-custodial money market protocol". Depositors (such as an Argent user) provide liquidity to a pool. In return they earn interest. When you deposit you receive an aToken. These are pegged 1:1 with the underlying asset and directly accrue interest in your wallet. You can store these tokens in Argent, bring them to Argent from another wallet, or send them externally.
Assets in a pool can be borrowed by other people, who put up collateral to borrow. The collateral comes in the form of other cryptoassets. (Why do borrowers use one cryptoasset to borrow another cryptoasset? People may want to keep their exposure to one asset, like ETH, that they hope will go up in value, while borrowing a stablecoin, like DAI, they they can use to trade with before paying it back).
How is the interest rate affected?
As soon as you deposit you will start earning interest. This interest compounds every Ethereum block (roughly every 10 seconds). The rates fluctuate depending on demand for assets from borrowers.
Where can I go to learn more?
Watch Aave's Founder, Stani, speaking at Ethereal Summit 2020
You can read the full overview of Aave in their whitepaper.
For the more technical, check out their Github
Aave is an early stage crypto project and you participate at your own risk. Key risks include:
- Security: While Aave has been audited by two independent security firms (OpenZeppelin and Trail of Bits), and has a bug bounty program, the security of the protocol cannot be guaranteed. You can read the full audits here: OpenZeppelin, Trail of Bits.
- Economic: Aave say: "If one of the supported currencies is compromised, collaterals will be affected, threatening the solvency of the protocol".
Aave have compiled a 'risk framework' that details further the risks they have identified.
Find out more about DeFi risks here.