WHAT IS THE AAVE PROTOCOL?
Aave is an Ethereum-based protocol that offers automated crypto loans. Users can deposit cryptocurrency as collateral and borrow other cryptocurrencies, up to a certain percentage of the collateral value. This is known as the loan-to-value (LTV), and Aave limits the borrowed amount to 80% of the current value of the pledged collateral.
Aave uses smart contracts, which are programs that automate the borrowing process by calculating the loan terms, collecting the deposited collateral, and distributing the cryptocurrency being borrowed.
Smart contracts are what enable Aave to operate without the need for a third-party intermediary.
For lenders, Aave allows users to deposit crypto into the platform and earn interest that is paid out by the borrowers.
Instead of matching lenders and borrowers directly, Aave offers liquidity pools into which users can deposit crypto assets, and those crypto assets are lent to borrowers