- Aave now dominates the DeFi market by over 15%.
- Aave currently has a market cap of over $3,497,354,070
- Also, Aave currently ranks fourth based on DeFi market cap size.
In addition, at the time of writing, Aave had a total value locked (TVL) of US$10.54 billion, with 4.7 million in ETH and 303.5k in BTC.
To clarify, Aave launched in 2017 with an aim to explore Ethereum’s potential to disrupt the financial sector. In fact, Aave initially launched as ETHLend and had a $16.2 million initial coin offering (ICO).
Aave founder Stani Kulechov wanted to create a platform that could connect crypto lenders and borrowers. ETHLend’s goal was to matching loan requests to specific offers. However, due to the 2018 crypto market crash ETHLend rebranded to Aave.
Aave differs from ETHLend in that Aave uses a liquidity pool system instead of individually matching lenders and borrowers. In addition, the Aave algorithm determines interests rates. For instance, if an asset is in high demand and low supply, Aave will raise the asset’s interest rate. Equally, if an asset is in excess Ave will lower its interest rate to attract borrowers.
To achieve this, Aave offers loans based on various cryptos based on the liquidity pool system. As such, borrowers must deposit a collateral amount more than the amount they wish to borrow. Notably, the Aave algorithm automatically liquidates a borrower’s collateral if its value falls below a specific ratio. Also, each Aave loan is managed by a smart contract that is verified by third-party auditors.
The Aave ecosystem also includes the Aave token AAVE. Aave users can get a discount by using AAVE as loan collateral. On the other hand, users that borrow AAVE are not charged a fee. In addition, AAVE grants its holders governance voting rights over the Aave platform developments.
The Aave ecosystem also includes aTokens which is Aave’s passive income function. Secondly, flash loans which draw on unused liquidity within the pool. Flash loans allow users to access uncollateralized loans. Also, the ecosystem includes rate switching which helps to address crypto market volatility. This function allows users to either lock in interest rates for their loans or opt for floating rates.
Finally, at the time of writing, AAVE was trading at $270.90. In addition, the DeFi token had a market cap of $3,497,354,070 and $319,757,703 24hour trading volume.