Article originally published on May 19th, 2020
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 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. Aave (like us!) want to bring DeFi into the mainstream.
How can I easily use it with Argent?
It couldn’t be easier in Argent. You just open the app, pick Aave in the Invest tab and select which asset you want to earn interest on. You can find the current rates here, and we’ll soon be adding them to the app.
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
- Join their Discord and follow them on Twitter
You use Aave at your own risk. Aave have compiled a ‘risk framework’ that details those they have identified, including the economic model and security of the protocol. Their independent security audits can be found here: OpenZeppelin and Trail of Bits.
It’s easy, just download or open Argent