Aave may be on the verge of becoming the leading decentralized finance (DeFi) lending protocol, with a liquidity mining program scheduled to debut on Monday.
Aave Improvement Proposal (AIP) 16 was approved earlier today, which means that beginning on Monday, 4/26 liquidity suppliers and borrowers in Aave’s USDC, DAI, USDT, GUSD, ETH, and WBTC pools can receive stAAVE incentives in addition to their normal interest yield.
Providers and borrowers in these pools can divide 2,200 stAAVE tokens every day from the protocol’s 2.9 million AAVE Ecosystem Reserve, which is reportedly worth about $1 billion, according to AIP 16. For example, money market Compound currently provides a 3.31 percent yield on stablecoin USDC, as well as 2% in COMP governance tokens, for a total yield of 5.51 percent. Meanwhile, Aave’s sector is currently offering a pure interest yield of 5.51 percent.
Aave has never seen something like this before. Despite not possessing a liquidity mining program like many of its rivals, the lending network has consistently been listed among the top DeFi protocols. Compound is still the top lending protocol, with over $15.4 billion in total value locked (TVL) across their markets, while Aave has $6.8 billion in total value locked (TVL) across their Polygon, Ethereum v1, Ethereum v2, and AMM LP token markets, according to their respective applications.
What is Aave?
Aave is a decentralized non-custodial liquidity market protocol under which customers may serve as depositors or creditors. Depositors provide liquidity to the economy in order to earn a passive income, while creditors can invest in an overcollateralized (perpetually) or undercollateralized (one-block liquidity) manner.
Aave is a collection of smart contracts that operate on the Ethereum blockchain and enable these assets to be managed by a distributed computing network running its applications. This means that Aave customers don’t have to trust a single agency or person to manage their money. They simply must have confidence that their code would be executed exactly as designed.
The Aave app enables users to create lending pools by lending or borrowing 17 different cryptocurrencies such as ETH, BAT, and MANA.
How does Aave work?
Aave borrowers, like other decentralized Ethereum lending schemes, must post collateral before they can borrow. Furthermore, they would only be able to invest up to the value of the collateral they publish.
One of Aave’s most exciting functionality is flash loans, which are uncollateralized loans granted to Aave developers to build smart contracts based on the same debt pools they borrowed from.
Aave makes it possible for special loans, called “flash loans,” to be issued and settled quickly. Such loans do not need any initial collateral and are available almost instantly.
Flash loans take advantage of a feature common to all blockchains: transfers are only completed after the network has approved a new block of transactions.
Flash loans are usually provided to borrowers who choose to participate in arbitration trade between two markets.
Aave consumers have the option to select between rates thanks to the website’s “price swapping” feature. They’ll focus on interest rates, which would be either “fixed” or “variable.” Given the unpredictability of cryptocurrencies, this is a significant advantage for DeFi users looking to raise money.
Will you be mining stAAVE?