Despite the numerous black swan events for crypto, the world of DeFi has grown exponentially in recent years. Undoubtedly, one of the most prominent areas of growth has been in the development of decentralized lending platforms.
While the evolution of such platforms has taken considerable time, it’s worth acknowledging pioneers like AAVE. But how did the DeFi lending and borrowing protocol rise into prominence? And how did it transition from ETHLend to AAVE? If you’re still wondering, this blog post will look at the history of AAVE and how it shaped the modern DeFi landscape.
ETHLend’s Beginnings
The DeFi lending platform, ETHLend, was launched in 2017 with a mission to make lending more efficient through blockchain technology. The protocol had a unique approach, which allowed users to borrow and lend crypto without the involvement of intermediaries. This model made borrowing and lending crypto simpler and more accessible than traditional lending.
Of course, the initial idea of a peer-to-peer lending platform faced many challenges. Essentially, the team behind the project allowed users to lend and borrow Ethereum in a secure, efficient, and user-friendly way. Users could use their ETH as collateral to secure loans, which helped reduce the risk of default. Moreover, ETHLend also featured its ERC-20 token, LEND, which could be used to pay fees or incentivize lenders and borrowers.
As the first DeFi lending platform, ETHLend was revolutionary in allowing users to easily borrow and lend crypto without involving intermediaries. Connecting borrowers and lenders directly enabled greater access to capital for those looking to borrow, and potential rewards for those willing to lend. Despite the initial lack of awareness, the team continued to improve the platform until 2018.
The Move to AAVE
Since its inception, ETHLend has grown to become a popular decentralized lending platform. But in 2018, it underwent a major change — it rebranded to become Aave (meaning “ghost” in Finnish). This rebranding was more than just a cosmetic shift because the platform adopted a new set of features. Ultimately, the change in course made the DeFi protocol more robust and user-friendly.
The new platform emphasizes increasing the liquidity of its users’ assets. It achieved this by introducing pooled liquidity pools and flash loans. The former allowed users to easily access liquidity for their assets without trusting a third party. Aave also began offering staking rewards. The service allowed users to earn passive income from their assets by depositing their AAVE tokens as collateral against protocol downfall.
Another major upgrade was the introduction of the Aave Protocol. It enabled smart contracts to use the same protocol when interacting with different decentralized finance platforms. This allowed users to move their assets between different DeFi protocols seamlessly and freely. Other significant features that helped establish Aave as a major player in the DeFi space include the following:
- Gas optimization — Introduced in V2 to make the platform more accessible and affordable.
- Improved user experience — Aave V2 and V3 introduced a number of UI and UX improvements, making the platform more intuitive and user-friendly.
- Stablecoins — A wide range of stablecoin integrations, including USDC, DAI, and the native GHO multi-collateral stablecoin fully backed by the Aave Protocol.
- Liquidity mining to incentivize providing liquidity to the platform.
- Flash loan refinements made the system more secure and easier to use.
- Introducing credit delegation as a way for depositors to deposit funds and delegate the borrowing power to other users.
Interesting fact: Aave introduced the Aavegotchi game, an interactive game that allows users to collect, breed, and battle creatures called “Aavegotchis”. The game has gained considerable popularity since its launch, further expanding the reach of AAVE’s user base.
What’s Next for AAVE?
While AAVE has already come a long way with its upgrades, the protocol is constantly improving. As of now, AAVE boasts a mouth-watering TVL of over $4.74bn, only a portion of the all-time high of $19.44bn in October 2021. Indeed, from its creation to its rebranding and launch of version 3, Aave has demonstrated a solid commitment to innovation. Moreover, it continued its work towards security, decentralization and community engagement. Undoubtedly, the Aave Protocol showcases strong fundamentals, guaranteeing it a lead position in innovation and growth in the DeFi space.
