The cryptocurrency world is full of various lucrative projects. This article is all about What is Aave crypto and the project’s new announcement. Is this DeFi project worth it? Let’s take a look at it in more detail.
What is AAVE?
Aave is a decentralized lending platform that runs on Ethereum. The project has witnessed outstanding development since the launch of lending pools. Anyone can utilize Aave to take a loan or borrow Ether and ERC-20 tokens. Aave is considered an innovative project.
As mentioned earlier, Aave is a decentralized lending/borrowing platform. Lenders earn profit by depositing cryptos, while borrowers achieve the ability to have flash/microloans, provided they employ some cryptos as security. Aave holders get discounted fees on the platform that gives them a vote in the upcoming development of the project.
During the DeFi buildup, Aave was one of the most commendable projects that closed the maximum funds. In addition to its unique lending platform, they provide a selection of around 20 cryptocurrencies to lend and borrow from. “Flash loans” is the primary selling pinpoint of Aave, giving borrowers the ability to receive quick loans. This concrete selling pinpoint comes with “Flash Payback”, where borrowers must recompense within the same transaction. Borrowers can also select between a variable and a specified rate.
The most significant step that the project has brought is the shift from a trading platform for loans to pool lending. In pool lending, lenders place their tokens together in a pool and borrowers pull from it. The interest rate is defined by supply and demand. If it is high, more % of the pool is already loaned. Aave presently supports different ERC-20 tokens. The range is continually being extended. The current offer and the associated interest rates can be viewed on the website. According to the website, almost $ 9,776,394,501.24 of liquidity is currently locked in Aave across 7 networks and over 13 markets. It is a completely decentralized, community-governed protocol with 118,151 token holders.
A Brief History of Aave and How lending operates on Aave?
In 2017, Stani Kulechov established ETHLend. This ETHLend has then developed into Aave, incrementally elevated with more and more attributes. This is Aave’s timeline:
- 2017: ETHLend extended $16 million in the ICO funding.
- 2018: ETHLend was renamed Aave.
- 2019: Aave V1 public testnet started.
- 2020 January: Aave V1 was founded. ETHLend stops its functions.
- 2020 October: AAVE crypto token projected and then LEND / AAVE migration 1:100.
- 2020 December: AAVE V2 was founded with new characteristics. Aave V1 works simultaneously.
- 2021 July: Aave lending platform has altered the name of their intended institutional DeFi product, Aave Pro, to Aave Arc. It was determined to display its function as an outlet for organizations to enter the decentralized economic enterprise.
In the fiat world, to obtain a loan, one needs to go to a bank. The bank requests collateral. If you want to take a loan from Aave, you have to put collateral. For this, you first deposit like a lender. This is then accepted as a deposit in case you want to borrow a token. The deposit saved must always be greater than the loan borrowed. How much the borrower can borrow concerning the collateral (LTV) is separate for each token. The loan period is not restricted. Anyone can borrow funds as long as they are liquid.
With Aave, the borrower can decide between a variable interest rate and a fixed interest rate. The fixed interest rate is generally more increased than the regular variable interest rate. The fixed interest rate makes it more straightforward to arrange an estimate. If the price of the borrowed tokens rises comparable to the price of the deposit or the value of the deposit declines relative to the price of the borrowed tokens, a particular threshold value (liquidation threshold) is closed, which may start liquidation. Then the deposit is transformed into the borrowed token and returned to the pool. The transformation of the deposit into the borrowed token is accomplished via the community. If the threshold is surpassed, anyone can swap the deposit for a discount. So you should earn more for it than on the open market.
The Stablecoin called GHO
1/ Calling all GHOsts ?
We have created an ARC for a new decentralized, collateral-backed stablecoin, native to the Aave ecosystem, known as GHO.
Read more below and discuss your thoughts for the snapshot (coming soon)!?https://t.co/P7tHl9LbBe
— Aave (@AaveAave) July 7, 2022
Just recently, AAVE disclosed that it is now preparing to launch its own stablecoin called “GHO”. This will be subject to the community decentralized autonomous organization’s (DAO’s) permission. If permission is given then the stablecoin will be “supported by a diversified set of crypto-assets,” according to the proposal. With GHO, Aave hopes to yield a huge amount of earnings and put it into the DAO Treasury. This revenue growth is utilized to back the project’s steady growth, particularly during a market downturn, as well as to help the community and governance participants.
The official page further described that this completely collateralized stablecoin will be local to the Aave ecosystem and open on the Ethereum network. It is anticipated to be proposed on other Aave-supported blockchains founded on coming community votes.
Even a proposal, the objective is for Aave to permit users to mint GHO tokens against their provided collaterals. GHO would be supported by various cryptocurrencies selected at the users’ choice, while borrowers would continue making a stake in their underlying collateral. This would function just like the current stablecoins, which mint precisely $1 worth of tokens when users give $1 worth of cryptocurrency. In GHO, a user must provide collateral (at a precise collateral balance) to be capable to mint GHO.
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Source: https://cryptoticker.io/en/what-is-aave-stablecoin-gho/