Aave (AAVE)

Comparable to - Brokerage firms

Simple Explanation - Aave was created to allow you as a consumer to lend, borrow and earn interest on your crypto without needing a middleman. This could have been a broker, a bank, a lender, etc. Aave takes a series of smart contracts within the blockchain and manages all of the assets through these contracts. Smart contracts are programmed through computers, eliminating human error and always producing the desired design.

A crypto experts explanation - Aave is a DeFi (decentralized finance) lending system that allows users to lend, borrow, and earn interest on crypto assets while cutting out the middleman. Aave's developers recognized a need for a system that could allow users to borrow and lend crypto assets while earning interest. Aave was developed as a system of smart contracts running on the Ethereum blockchain, allowing assets to be managed by a network of computers running its software. This also allows all human error to be cut out since the funds are managed not by an institution or broker, but instead by computer code that is specifically written to manage funds. Aave requires borrowers to post collateral, based on the collateral borrowers are then capped at the value of the collateral posted. This collateral is then placed into lending pools, which a borrower can take a loan from. Aave also offers flash loans which can be both instantly issued and settled while requiring no upfront collateral. Aave facilitates loans by releasing two different tokens: aTokens (issued to lenders so they can collect interest on the deposits) and Aave or the native coin of AAVE. Each loan has the protocol fees built into them, so the fees are automatically taken care of during each transaction. AAVE, an ERC20 token, was made specifically for the Aave network as a governance token. Since AAVE tokens can be utilized for loans, borrowers are not charged a fee if they elect for the loan to be released in the native Aave token. Conversely, if a borrower utilized AAVE tokens as collateral they will get a discount on the fees applied and can borrow more. Utilizing AAVE allows owners to have more control of their money and the coin. Owners of AAVE tokens can develop rules governing the Aave systems as well as vote on interest rates, view loans available before they are released to the public, utilize AAVE tokens as collateral to get a discount on fees applied and can borrow more.