What is AAVE in Forex Terminology

AAVE, also known as AAVE, which means “spirit” in Finnish, is a decentralized system where users can lend, borrow, or receive interest on their crypto assets. Essentially, AAVE is a system of lending pools.

Aave users must put up collateral for everything they lend out, and they can only lend out the exact amount they put up as collateral. In exchange, they receive what is known as an aToken, a token that is coded so that lenders receive the interest they are entitled to and is linked to the value of another asset.

AAVE Explained

While depositors can earn passive income, borrowers can borrow at either below or above interest rates, all without an intermediary.

Aave runs on the Ethereum blockchain and works with a system of smart contracts and lending pools for each cryptocurrency you want to either deposit or lend.

AAVE offers two types of tokens:

  1. aTokens: these are issued to lenders, giving them the ability to collect interest on their deposits.
  2. aAVE tokens: these are AAVE’s own tokens that allow users to receive discounted fees.

AAVE also offers “flash loans,” a type of load that is meant to be issued and settled instantly without providing collateral in advance. Since Ethereum’s block interval is about 13 seconds and Aave is built on that, flash loans take place during that 13-second period.

To do this, a borrower can request funding from AAVE, but must repay it with a 0.09% fee within the same block, or the entire transaction is cancelled, leaving no room for risk on either side of the transaction.

The story behind AAVE

Founded in 2017, Aave is the vision of Stani Kulechov. The for-profit Swiss-based company was formerly known as ETHLend and raised an estimated $16 million in its 2017 Initial Coin Offering (ICO).

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