Introduction:
Decentralized Finance is the root cause of blazing fire in the traditional financial system. A new revolution has emerged and witnessed that investment and finances can be done with ease. DeFi has emerged as a life saving option with a bundle of financial services like lending and borrowing, staking, Decentralized apps, asset management, and much more. These DeFi protocols offer advantages that are paramount in the ecosystem of blockchain technology.
What is Aave?
Aave’s DeFi platform is an open-source, decentralized blockchain-based protocol powering a non-custodial money market that allows lenders and borrowers to trade cryptos and offer stable and variable interest. It is one of the top lending and borrowing platforms in a DeFi ecosystem. The network accepts liquidity from depositors and allows borrowers to avail loans from the platform with an undercollateralized or overcollateralized approach. As compared to other DeFi protocols, Aave has set its users free from lengthy registration processes like KYC (Know Your Customer) and AML (Anti-money laundering).
What Is Aave (LEND) Token?
LEND is the native Token of Aave, which is also recognized by its old name as ETHLend. It is entirely set to be swapped with the governance token Aave. LEND is the Aave token, built with the usage of Ethereum token ERC-20 principles. LEND is used to obtain discounts on transaction fees for the security of the platform. It offers voting rights on governance issues came from Aave Improvement Proposal (APIs). Even if the tokens are consumed as collateral for loans, it can be used for voting purposes. To initiate the swap, a governance token is offered through the existing LEND token holders.
What Is Aave Protocol?
It is an open-source and decentralized blockchain-based protocol used for creating money on the Ethereum blockchain. Depositors deposit cryptocurrency in the liquidity pool that leads to increment in the liquidity. Meanwhile, borrowers are allowed to grasp loans from the platform in an undercollateralized or overcollateralized way. There is no entailment to match lender and borrower orders on a network. Alternatively, the deposits in the pools are used for availing instant loans on the pool’s state. Right now, there are two money markets that users use: Aave and Uniswap.
Key Features Of Defi Lending Protocol Like Aave
- Payment On Collateral: If users want to compensate their loan with a part of the collateral, then they will have to execute four separate transactions on various protocols. They will have to withdraw the collateral, buy the borrowed cryptocurrency, pay the debt amount, and thus unseal all the deposited collateral.
- Debt Tokenization & Native Credit Assignment: Users will get tokens as per their debt representation. This enables the assigning of native credit with the DeFi protocol.
- Constant Deposit Rate: Interest rates generated on deposits are not affected by fluctuations of the market.
- Revamped Stable Borrow Rate: The interest rates are updated when the deposits are locked for a certain period.
- Private Market: DeFi protocol permits governance to explore open markets to uplift all types of tokenized assets.
- Upgraded a Token: DeFi protocol has an interest bearing token known as a token. These are minted during a transaction and burned when retrieved. It is pegged with a value of 1:1.
- Optimizing Gas: This is a work-in-progress feature. It will result in the cost-cutting of transaction costs for interaction. If the exchange is done in a considerable quantity, then the cost may be reduced by 50%.
- Security: The internal design and architecture have been upgraded. It has been presented in a more user-friendly way, which is more secure and reliable.
- Native Trading Functionalities: It will allow users to trade their debt position from an asset to another. Marginal trading will also be introduced.
- Governance: The new governance feature has introduced various new versions. Voting weight can be transferred to any address token holders. It might lead to the emergence of protocol politicians. This means that the user can separate the commission in a single transaction if they wish.
Lending And Borrowing In A DeFi Protocol Like Aave:
DeFi Lending Protocol:
As lenders, one can deposit their tokens in the liquidity pool and earn interest. The market is volatile, due to which the interest rates are not fixed. Interest rates that are received by the lenders depend upon the borrowing rate and utilization rate of tokens. Lenders receive a higher return on the interest rate when the utilization rate is high. It should be noted that depositing a meagre amount is of no use as the transaction cost surpasses the rewards.
DeFi Borrowing Protocol:
As a borrower, one needs to deposit an asset as collateral on the network. As per the collateral, eligibility to borrow is decided. Liquidity of the asset that the borrower wants to borrow also influences the borrowing process. They can choose between the variable and stable interest rate to end the process. The steady pace is a short term fixed-rate depending upon the market rotation. The variable interest rate is calculated as per the demand and supply protocol.
Why Choose Infinite Block Tech For Creating A DeFi Protocol Like Aave?
Infinite Block Tech is a leading DeFi Development Company with vast experience in cryptocurrency exchanges, blockchain development, and Decentralized Finance. We help you unlock different avenues of profits with us through our DeFi protocol development. Infinite Block Tech offers DeFi Solution at doorsteps by facilitating the following advantages to its users:
- 24×7 customer support
- Cost-effective
- Advanced technology usage
- User-friendly
- Years of expertise
- On-time delivery
- Confidentiality
- An omnibus for all your needs.