LEND – Forex Academy

With blockchain came the concept of finance that’s outside the control of the state and government. Cryptocurrencies have been the rage these past few years. But now a bolder and fresher idea is emerging, and it’s called decentralized finance (DeFi). DeFi is the notion that the people have the power, and they don’t have to trust traditional finance systems to make the calls.

Aave is a DeFi project that allows users to borrow crypto without depositing collateral. Lenders can also deposit money and start earning interest right away without lifting a finger.

Describing itself as “an open-source and non-custodial protocol enabling the creation of money markets,” Aave introduced the idea of uncollateralized loans, carving out for itself an influential position in DeFi.

With that, let’s find out more about the project!

What’s Aave?

Launched in 2018, London-based Aave is a DeFi platform running on the Ethereum blockchain that lets you lend and borrow a wide range of cryptocurrencies in a decentralized and peer-to-peer manner. Aave takes its name after the Finnish word for “ghost.” The team chose this name to reflect the constant evolvement and imaginative technology that intrigues users.

The project brings distinguished features to the DeFi space, such as uncollateralized loans and “rate switching.” Aave utilizes the Aave Protocol to create various types of crypto markets where users can build an investment portfolio.

Background of Aave

Aave was originally known as ETHLend, a crypto lending platform established in 2017 by Stani Kulechov. The company raised about $600,000 worth of Ether in exchange for 1 billion LEND tokens.

ETHLend rebranded into 2018 in order to incorporate even more platform features, suiting the current cryptocurrency consumer.

Aave’s Offerings

Aave offers quite an impressive range of unique collaterals for any DeFi lending protocol.

#1. Flash Loans

Flash loans are one of Aave’s biggest selling points, and that’s especially because you don’t need to deposit any collateral to use them. Instead of using collateral to ascertain payments, flash loans use the timing of the loan’s repayment. Flash loans were invented by Aave, and they work this way:

Borrowed and repaid in the same transaction
No collateral needed
Borrow and return the borrowed amount plus a small interest
All this needs to happen at the same time, or the transaction will not be approved

Flash loans can be applied in the following kind of scenarios:

To take advantage of crypto price differences in two or more exchanges without necessarily having the principal amount to do so
Debt refinancing, or swapping collateral long positions without having to pay the repay the debt of the loan position

#2. Flexible Rates

Unlike most lending platforms that use either fixed or variable interest rates, Aave implements a “rate-switching” function that allows borrowers to switch between “stable” and “variable” rates, a very handy feature in the extremely volatile crypto market. For high-interest rates, a borrower can opt for the fixed-rate, but for volatile rates that might likely take a dip, they can go for the variable rate.

Thanks to this new and exciting option, Aave has witnessed particularly strong growth for stable rates loans after their introduction in May 2020. Note that ‘stable’ here does not imply ‘fixed.’ Rather, Aave’s stable loans are more stable variable interest rates that are resilient against wild price swings. This ability to rate-switch gives users more control over their loans by allowing them to choose the best possible rates.

How to Lend on Aave

Getting started on Save is fairly simple. Visit https://app.aave.com/ and connect using a web 3.0 wallet such as Walletconnect, Coinbase Wallet, or Fortmatic. You can also connect with the Ledger hardware wallet.

Depositing is easy. Just select an asset and enter how much you wish to lend. Next, allow Aave to access the asset. Then, you’ll need to sign to approve the transaction. Your deposited funds will go to the lending pool, after which you start monitoring real-time how much interest you’re gaining on the Aave dashboard.

Aave’s interest-earning tokens are known as aTokens, which are similar to Compound’s cTokens. However, unlike the cTokens, aTokens retain the value of the underlying asset and increase only in amount. On the other hand, cTokens appreciate in value with interest.

The LEND Token

LEND, an ERC20 standard token is the native token of the Aave ecosystem. LEND token holders get the right to make their voice heard on any proposals advanced by the Aave team. Such proposals include interest rates, the addition of new assets, liquid configurations, and so on.

LEND also is burned so as to prevent inflation and increase its value over time. 80% of platform fees are regularly burned on the open market for this end.

In the future, Aave plans to increase the staking ability of users who’ll then get to participate in protocol governance as well as have a claim in exchange fees in exchange for helping secure the Aave network against malicious borrowers.

LEND’s distribution was as follows:

30% to core developers
20% reserved for user experience development
20% reserved for management and legal
20% reserved for promotions and marketing
10% result for unexpected costs

Which Assets Does Aave Support?

Aave currently supports a variety of tokens, including but not limited to Basic Attention Token (BAT), Synthetix USD (SUSD), Chainlink (LINK), Synthetix (SNX), Decentraland (MANA), Kyber Network (KNC), Ethereum (ETH), Dai (DAI), Aave (LEND), TrueUSD (TUSD), Tether (USDT), Wrapped BTC (WBTC), 0x (ZRX), USD Coin (USDC), Maker (MKR) and Augur (REP).

Who is the Team Behind Aave?

Aave is the brainchild of CEO Stani Kulechov, who originally founded ETHLend. Jordan Lazaro Gustave is the COO, and Nolvia Serrano is the CMO. Both Gustave and Serrano bring over their experience from ETHLend. All in all, the team is made of 22 members with eclectic skills ranging from blockchain, fintech, Ethereum, smart contracts, lending, payments, custodial services, and gaming.

Aave: Tokenomics

As of July 30, 2020, Aave is trading at $0.0324118, and with a market cap of $421, 352, 978, it’s the 30th biggest cryptocurrency in the world. Aave has a 24-hour volume of $64, 663,115, and a circulating and total supply of 1, 299, 999, 942. The token’s all-time high was $0.442615 (Jan 07, 2018), and its all-time low was $0.003353 (Sep 06, 2019).

Where to Buy and Store LEND

You can grab some Aave from any of several exchanges, including Binance, MXC, Bilaxy, Bibox, Gate.io, Poloniex, Alterdice, Uniswap, dex.blue, Eterbase, Fatbtc, and Loopring.

As an ERC20 token, LEND can be stored in any wallet that supports Ethereum. You will not go wrong with any of these choices: Atomic Wallet, Trust Wallet, and of course, the hardware wallets (and hence ultra-secure) Ledger and Trezor.

Final Words

Given its constant re-invention, Aave’s ghost reference is fitting. Its uncollateralized loans and rate-switching features are two of its radical innovations to ever be seen in the world of finance. And that’s what DeFi is all about: disrupting norms to deliver real value.

Introduction

Crypto trading has become one of the hot topics of the market. With the security of cryptography and interesting rates of the currency, everyone wants to get their share of the pie. That is why more people are looking for opportunities to generate some income with the help of cryptocurrency. Two best methods you can opt for making money through cryptocurrency are lending and staking. Let’s dive into the two techniques and see which one can be beneficial for you.

Crypto Lending

The concept of crypto lending can be understood as a simple cryptocurrency collateralized loan. A borrower can utilize their crypto assets for getting a stablecoin or fiat loan. In exchange for this, the lender gets a fixed (agreed-upon) interest rate. Alternatively, the borrower can also use their stablecoins as collateral for borrowing crypto assets.

The whole process raises the cryptocurrency’s productivity by reallocating it to people who are in immediate need (borrowers) from those who are not (lenders). That is why crypto lending proves to be a powerful financial primitive in the crypto market that traditionally had only two options: trade and HODL.

The only drawback to crypto lending is that you got to have some capital or assets at your disposal to get the loan. That means they are over collateralized and don’t offer all advantages of true credit.

Crypto Staking

You may find people talking about staking as just holding some crypto and earning rewards in exchange for it. However, there is more to this concept. Staking involves the Proof-of-Stake mechanism, where new blocks get produced and verified through staking.

So unlike mining, you don’t need special computers to solve problems here. But you do need to follow some conditions to become a new block validator, such as:

Your cryptocurrency wallet must hold a minimum amount.
Your wallet must remain online throughout the day and every day.
Your wallet should support crypto staking.

Other than these, different blockchains may apply different rules. So you need to check with the blockchain for how you can stake. Plus, staking is not supported by every cryptocurrency, and you have to choose only from the provided options.

In exchange for holding these staking processes, you get a fixed percentage of rewards per year. You can also opt for a pool, where multiple holders keep their coins together. This increases the overall chances of validating a block and getting higher revenues.

Lending vs. Staking: Which One To Opt?

It would be wrong to state that either of them is better than the other. They both have pros and cons. Your choice majorly depends on the type of investor you are. In case you need instant stable coins with the help of assets, lending would be more beneficial for you. On the other hand, you can opt for staking if you want to generate a significant amount of money by holding the crypto coins in your wallet.

The crucial point here is to keep an eye on the blockchain in which you are investing. You need to look through all the aspects before putting money in a particular investment method.