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As a DeFi loan agreement, Aave is similar to Compound, but has some unique features that broaden the boundaries of financial innovation. Lightning loans, flexible interest rates and credit entrustment are all new services and signs of Aave as a leader in promoting DeFi expansion.
Let's start with the most basic. Using Aave, people can borrow and borrow cryptocurrencies in a decentralized and trustless manner, which means that the platform does not have a centralized management agency. On the contrary, smart contracts affect actions taken by users and execute rules through self-executing code when certain conditions are met.
Like other lending agreements, users deposit funds into a pool, and then they can borrow from it. Users need to lock in a collateral amount higher than they intend to borrow to protect lenders from negative price fluctuations. In addition, each fund pool reserves a certain percentage of funds to hedge against fluctuations within the agreement, which also makes it easier for lenders to withdraw funds at any point in time.
Aave currently provides 19 assets for lending, including LINK, USDC, USDT, ETH, DAI, SNX, WBTC, KNC and BAT. When users deposit funds into one of the asset pools provided on Aave, they will get the same amount of aToken in return, allowing them to earn interest on the deposit. For example, if you deposit 500 MKR into the MKR pool, you will get 500 aTokens in return, which you can redeem at any time. Interest is calculated by the second, and you can check it in real time.
Aave creates innovative DeFi gameplay
Aave is known for launching a number of truly innovative platform features and laying the foundation for the development of next-generation DeFi applications.