You know how you purchase a car that’s a little too pricey but extremely gorgeous, so you go ahead and buy it anyway? To do so, you’ll need to take out a bank loan. You inform them they can keep the automobile title until the loan is paid off. That way, if you don’t pay your loan, they can come and take your automobile. Or, what if you’re preparing to buy your first home? For the most part, most people will require a mortgage. You put down a 20% deposit so that you can borrow the remaining 80% and make payments on it. The money for the automobile and the house, on the other hand, came from a bank. Then lend money with the expectation that you would pay a high-interest rate, and they pass that interest on to their lenders. Of course, the bank will take a portion. Well, Aave is the cryptocurrency version of that bank.

What is Aave?

Aave 2023

Aave is a decentralized finance platform that allows users to lend and borrow cryptocurrency in exchange for fees. Aave is a peer-to-peer loan platform that uses cryptocurrencies as a trading asset.

Aave also uses an algorithm to assess lending rates and match lenders with borrowers. Aave also has an Aave token, which is an Ethereum token that supports their platform’s governance.

In short, the idea behind this token is that token holders will be able to vote on future updates to the program. Around the year 2017, a group of developers was working on a project called ETHLend. They basically built an MVP platform that paired lenders with different types of borrowers and it wasn’t automatic.

Borrowers were required to wait for a lender to meet with them. 

Two major problems faced by Aave in their Initial Days

Liquidity, or the amount of money in the economy, and connecting borrowers to lenders were two major issues they had to deal with. So they renovated ETHLend at the start of 2020, resulting in Aave. The cryptocurrency bear market, according to the developer, was the finest thing that could have happened to assist them to pivot their product. To run the platform, Aave uses smart contracts, which are just bits of code that are automatically executed based on particular criteria.

The Solution

Aave used a peer-to-peer smart contract mechanism instead of peer-to-peer lending, which required a borrower to match with a lender. As a result, lenders could put money into a smart contract and earn interest, while borrowers could put their collateral into another smart contract and borrow from whichever smart contract they wished. They employed novel smart contract algorithms to calculate loan rates based on the amount of liquidity in each smart contract.

Aave is a word that means “ghost.” They stuck with it for the branding because it’s all anonymous whether you lend or borrow money. It is not regulated by any banks, no one else can see what you are doing, and you have no idea who is on the other side of that smart contract.

What is a Smart Contract?

A Smart Contract is computer software that governs the transfer of digital assets between parties under particular conditions in a direct and automatic manner. A smart contract functions similarly to a standard contract, with the added benefit of automatic enforcement. Smart contracts are computer programs that run exactly as their developers intend. Smart contracts are enforceable by code in the same way that regular contracts are.

Aave & Overcollateralized Loans And Liquidation Threshold

The house was collateral whenever you borrowed 80 percent of the value of your home to make payments on it. This means that if you were unable to repay the loan, the bank would simply evict you and seize your property. In other words, you granted them the security that they can seize if you don’t pay. Crypto loans, on the other hand, do not always function this way. You must be overcollateralized if you wish to borrow cryptocurrency.

This means that if you want to borrow $100, you’ll have to offer the bank a total of $120. Most people would think this is ridiculous. Why in the world would you give someone more money than you want to borrow? Especially if you already have that money. Consider what would happen if I handed you $100 worth of Ethereum and you lent me $80 worth of Tether, a stable coin pegged to the US dollar. You spend eighty dollars for a few months before deciding to repay it and receive your Ethereum. By that time, the price of Ethereum had doubled. So you pay out your $100 in Ethereum, but you actually get $200 in value because Ethereum’s price has risen. However, this is a two-edged sword. Because Aave has a feature called Liquidation Threshold, which allows them to sell your assets to cover the loan you’ve created. This method ensures that investors never lose money.

How to buy Aave in 2022?

Aave is listed in almost all major cryptocurrency exchanges. If you would like to buy Aave against BTC, ETH or others alts including stablecoin, you can register on any of the exchanges mentioned below and purchase your first Aave tokens.

Buy Aave Register here
Binance Sign up here
Huobi Sign up here
OKEx Sign up here
KuCoin Sign up here
Coinbase Sign up here
eToro Sign up here
FTX Sign up here

If you are from India, and wish to buy Aave against INR, below are some of the Indian exchanges:

Buy AAVE Register here
WazirX Sign up here
CoinDCX Sign up here
Giottus Sign up here
Kuber Sign up here
Vauld Sign up here

Frequently Asked Questions About AAVE Cryptocurrency

Is there a future for Aave?

Aave is a cryptocurrency with a bright future ahead of it. Riding the crypto wave, Aave will govern the crypto kingdom, and it will have a lengthy reign as a form of payment. Yes, the craze of Defi has reduced, however, for crypto to survive, Defi has to play a huge role. As Aave is one of the top most DEFI projects, I am really hopeful for Aave. Also, Aave has recently launched V3 version.

Is AAVE a good investment?

Perhaps it is. Aave has plans to make its protocol more flexible and introduce a mobile wallet software this year. Aave is also preparing for its 3.0 release.

Should I invest in AAVE?

It is contingent on the situation. Because the Aave token is largely used for governance, it may be worthwhile to invest if you want a role in voting on the lending platform. Although most price estimates indicate that the price of its token will climb, not everyone is optimistic about AAVE. Before investing in any cryptocurrency, you should always perform your own research.

Will AAVE go up?

It could work. The majority of AAVE price predictions indicate that the lending token will gain in value over the next few years, but the rate of increase will differ. DigitalCoinPrice believes it will not reach $1,000 within a decade, while WalletInvestor believes AAVE will lose the majority of its value in the future years. Remember that cryptocurrencies are extremely volatile, and you should never put more money into them than you can afford to lose.

Where can I buy Aave?

Aave is currently available for purchase on major cryptocurrency exchanges, including Binance. Once you’ve created an account on one of the Aave-trading exchanges, you’ll need to transfer your Bitcoin or Ethereum from Coinbase to that exchange. This is accomplished through the use of a wallet mechanism.

Is Aave worth buying in 2022?

The price projections of numerous experts have had no effect on the Aave coin’s ability to surpass its competitors. Despite this, the Aave community has set higher goals for itself. Aave should exceed the expectations of all cryptocurrency investors who have discovered its platform to be incredibly user-friendly and interactive. Bitcoin and Ethereum prices are plummeting, and Altcoins are following suit. This comes as speculators began to steer clear of cryptocurrencies due to the considerable risk they entail.

Aave has a lot of potentials and should be able to reclaim its past glory. AAVE has a bright future, according to AAVE’s price prediction, and it would be foolish for investors not to take advantage of the current dip. The greatest way to invest in Aave is to buy on dips, which is what you should start doing right now.

However, having said that, if Bitcoin continues to plummet, it would also be dragging the altcoins including AAVE.

So, please DYOR and decide for yourself if AAVE is worth buying in 2022, as not everyone’s personal finance would be same. But if you do, ensure you do not end up investing more than 2 percent of your portfolio in Aave over a course of time.