Aave

Aave (AAVE) is the native cryptocurrency of the Aave platform: a decentralized finance (DeFi) platform where users can borrow a range of cryptocurrencies, as well as lend assets in exchange for interest payments, all without needing a middleman.

AAVE was first distributed following an initial coin offering in November 2017, in which Aave raised $16.2 million. A total of one billion coins were sold. Initially, 77 percent of the total Aave project tokens went to investors, while 23 percent went to the project and the project’s founders.

In 2020, Aave arranged a token swap for users to swap the outdated LEND coin for the new AAVE coin at a ratio of 1:100, meaning 1 AAVE for every 100 LEND. The new AAVE token built in more features so that users could have more control over the protocol.

The AAVE token provides users with certain perks, including lower fees on the platform. AAVE is also a so-called “governance token,” meaning users can vote on decisions that will affect the future of the platform.

AAVE’s price hovered at around $60 near the end of 2020, according to price data provider CoinMarketCap, before spiking to a high of $529 in February 2021 amid an industry-wide crypto bull run. AAVE’s price hit a peak of $638 in May 2021, according to CoinDesk’s historical price data.

Aave connects cryptocurrency borrowers with lenders directly so that they don’t have to go through a trusted middleman as they would in traditional finance. Like with normal loans, lenders can earn interest from lending their funds to others. An easy way to think of it is Aave allows people to become their own banks, and loan money to people like a bank would and charge interest.

There are more than 30 cryptocurrencies that users can borrow and lend, including ether, the native token of the Ethereum blockchain, and dai.

As described in Aave’s white paper, to lend cryptocurrencies, lenders lock up their funds into a “liquidity pool” of tokens. That pool is secured by a smart contract, a method of replacing intermediaries with code with the help of a blockchain to allow for new types of interactions online. In this case, the smart contract helps to match lenders with borrowers without requiring a middleman.

When locking their funds into the pool, the lender in return retrieves an “aToken,” pegged 1:1 to the token they are lending.

Borrowers can use these liquidity pools for a novel type of extremely speedy loan: flash loans. Flash loans can be used to take advantage of arbitrage opportunities across the crypto ecosystem. They don’t require collateral, but borrowers need to repay their loan in the same transaction (usually in a few seconds). If the loan is not paid up in the same transaction, it is reversed. That is possible because of the speedy nature of DeFi and cryptocurrencies.

In early 2020, AAVE’s price bounced between $30 and $80, according to market data provider CoinMarketCap, hitting a peak of $528 in February of 2021. In May 2021, AAVE hit an all-time high of $638, according to CoinDesk’s historical price data.

The Aave project was founded by entrepreneur Stani Kulechov in 2017 in Switzerland. Aave was called ETHLend until September 2018 when it rebranded.

In 2020, Framework Ventures and Three Arrows Capital invested $3 million into Aave. According to Crunchbase, other investors include Blockchain Capital, Standard Crypto, Blockchain.com Ventures and DTC Capital.

Aave launched the Aave Protocol on its network in 2020, making it possible for users to take advantage of the platform on real funds for the first time.