Bonsai logo

Aave, launched in 2020, has emerged as a dominant force within the Decentralized Finance (DeFi) landscape, boasting a Total Value Locked (TVL) of $15 billion by March 2024, indicating the substantial amount of cryptocurrency deposited within its protocol across 8 networks. This DeFi giant facilitates non-custodial lending and borrowing on the Ethereum blockchain and other networks, offering a permissionless financial ecosystem distinct from conventional banking systems. Aaves user-friendly interface and over-collateralization requirements aim to secure and streamline user transactions.

The platform enables users to lend and borrow digital assets through liquidity pools, rewarding lenders with interest and providing borrowers with flexible loan options. Users interact with the platform by depositing assets to lend or providing collateral to borrow, receiving interest or paying it respectively. Aave introduces ""aTokens"" to lenders, representing both their original deposit and accrued interest, thus functioning as yield-bearing assets.

Aave also innovates with flash loans, offering uncollateralized loans that must be repaid within the same transaction block, a feature aimed at experienced DeFi users for arbitrage or other quick-turnaround strategies.

The AAVE token underpins the platforms governance, allowing token holders to vote on proposals affecting the protocol. It also provides fee discounts and staking rewards, contributing to the protocols security. The AAVE token, essential for the protocols governance and operational efficiency, underscores the platforms commitment to decentralization and user empowerment.