Aave is an open-source and non-custodial money market protocol that allows its users to earn interest on deposits and to borrow assets. Aave protocol went live on the mainnet in January 2020 with the support of 16 different assets, including 5 stablecoins. In June 2020, Aave reported having reached $100 million in market size.
As one of its main launched features, Aave introduced Flash Loans that enable users to instantly borrow assets with no collateral required. The safety of funds in the reserve pool is guaranteed by Aave’s ability to reverse the transactions and undo all the executed actions in case the liquidity is not returned to the pool on time. As per Aave, this product is designed for developers and other technically advanced users.
Aave's other products and features include a stable rate model – a new interest rate model for lenders designed to protect borrowers against the interest rates volatility – rate switching, perpetual loans and an innovative tokenization model. All loans within the Aave ecosystem are over-collateralized, with the exception of Flash Loans.
Deposits in Aave are tokenized as aTokens, interest bearing tokens that are pegged 1:1 to the underlying deposited asset. These aTokens accrue interest every second directly in the user's wallet.
Aave Protocol currently offers 2 markets: the Aave Market, which offers 17 different assets for depositing and borrowing, and the Uniswap Market, where Uniswap liquidity providers can use their UNI tokens as collateral. The Uniswap Market supports 6 UNI tokens.
As a part of its launch in January 2020, Aave partnered up with Chainlink to create the Aave Oracle. The project claims to be the first lending protocol to leverage off-chain data to calculate lending rates via a decentralized network of price oracles.
In March 2020, Aave announced its partnership with Tether (a platform that powers USDT stablecoin) to facilitate the adoption of USDT stablecoin and the decentralized finance (DeFi) industry in general.
Aave are the active supporters of the DeFi ecosystem, regularly coming up with community incentivization programs, grants, and new features.
Security and Risk
Aave Protocol has had audits by Trail of Bits, Open Zeppelin, and Consensys Diligence. Aave also has an ongoing bug bounty program where community members get rewarded for reporting any bugs or vulnerabilities in the code. The Aave Risk Team also published a Risk Framework outlining the risks associated with the different currencies in Aave Protocol and the processes in place to mitigate them.
- 1. Official website
- 2. https://medium.com/aave/pop-the-champagne-aave-protocol-is-live-721731763b58
- 3. https://medium.com/aave/development-update-whats-up-with-aave-b2e18294dc16
- 4. https://medium.com/aave/the-uniswap-market-is-live-on-aave-protocol-12b5a4cc5e2
- 5. https://www.crowdfundinsider.com/2020/03/158601-tether-teams-up-with-aave-protocol-to-promote-wider-adoption-of-usdt-worlds-largest-stablecoin/
- 6. https://github.com/aave/aave-protocol/blob/master/docs/ToB_aave_protocol_final_report.pdf
- 7. https://blog.openzeppelin.com/aave-protocol-audit/
- 8. https://diligence.consensys.net/audits/2020/05/aave-cpm-price-provider/
- 9. https://aave.com/bug-bounty bug bounty program
- 10. https://docs.aave.com/risk/