AAVE is the native token of the Aave Protocol, a decentralized non-custodial platform that provides liquidity in the crypto market. Users can provide liquidity via smart contracts to Aave and earn attractive returns. In addition, they can also borrow crypto assets from Aave in an overcollateralized or undercollateralized manner.
Aave protocol originally started on the Ethereum blockchain but operates on additional blockchains. As of January 2023, it is the third largest DeFi platform on the Ethereum network. Aave also works on Ethereum Layer-2 networks such as Polygon, Optimism, Arbitrum, and other blockchains, such as Avalanche, Fantom, and Harmony.
The completely decentralized community-governed DeFi protocol leverages AAVE as its governance tokens. AAVE token holders enjoy voting rights on Aave Improvement Proposals (AIPs) submitted by other users, including what new assets to support in the platform and future upgrades to its features.
Users can also stake AAVE to contribute to securing the Aave platform, earning attractive interest in return for their efforts. The rewards earned by stakers include a portion of the fees generated by the Aave Protocol.
The Aave Liquidity Protocol is one of the crypto industry’s largest decentralized finance (DeFi) projects. As liquidity providers, users can supply liquidity in supported crypto assets on the platform and generate passive income on their holdings.
The platform lets users and dApp developers borrow cryptocurrencies against their collateral across multiple blockchain networks and assets. What sets Aave apart from its competitors is the concept of flash loans that enables instant loans of crypto funds from the protocol without any collateral. However, they need to return the liquidity to Aave's liquidity pools within the period of one block transaction.
Suppliers earn interest from what the borrowers pay Aave. The rates for supplying and borrowing vary based on the demand and supply of each crypto asset supported by the DeFi protocol.
The latest version, Aave V3, offers greater capital efficiency, improved security, cross-chain functionality, and higher levels of decentralization. Another key feature of Aave V3 is the Isolation Mode, which allows the platform to list new assets as isolated assets with a specific debt ceiling, to manage risks better.
Aave was founded as ETHLend by Stani Kulechov on the Ethereum blockchain in 2017 as a decentralized peer-to-peer (P2P) lending platform. Its initial coin offering (ICO) raised $16.2 million to fund its operations and growth.
The company rebranded from ETHLend to Aave in September 2018. In January 2020, Aave Protocol launched on Ethereum as a liquidity protocol where users could supply liquidity and earn interest, borrow assets to fund their projects, and more.
In April 2021, the Aave Protocol introduced its liquidity mining program, becoming the biggest lending dApp by TVL and relative market cap. The platform enjoyed an all-time high total value locked (TVL) of more than $19 billion in late October 2021.
In January 2022, its founder and CEO, Stani Kulechov, announced that Aave would develop its own mobile wallet. Following a testnet launch in January 2022, Aave V3 went live in March 2022 across Polygon, Fantom, Avalanche, Aribtrum, Optimism, and Harmony ecosystems.
As the native token of a leading DeFi platform, the AAVE token is a good investment to consider, especially if you believe in the future potential of decentralized finance. In addition, you could buy and stake AAVE to earn passive income and grow your crypto portfolio.
The AAVE price could witness an uptrend as more users access Aave Protocol’s services for lending liquidity or borrowing crypto assets. The higher on-chain activity could increase the demand for the AAVE token and send its value higher in the market.
The AAVE token is also a good investment if you wish to participate actively in the DeFi market and would like to contribute to Aave Protocol’s decentralized governance mechanisms. As a token holder, you could have a say in what new assets the protocol will support and other future upgrades its developers could include.
Although it is impossible to provide an accurate Aave price prediction, several fundamental factors could drive volatility in this token. These include:
The AAVE crypto price could head higher amid suppliers’ and borrowers’ rising adoption of the protocol. Higher on-chain activity is one of the most significant factors that could drive up the value of the AAVE token in the crypto market.
As Aave Protocol expands to more blockchain networks in the future, it could enjoy higher use. Such an expansion would also help the platform support more crypto assets, increasing its appeal among users.
As the developers add more features that make the non-custodial liquidity protocol a better platform than its competitors in the market, we can see the adoption of the protocol rise. This could contribute to an uptick in the price of AAVE token.
Market sentiment is another crucial factor that could drive changes in the value of AAVE crypto. A bullish sentiment among crypto investors could encourage higher buying activity in the market and higher overall activity in the DeFi sector, which could also support the AAVE price. However, a risk-off mood or bearish sentiment keeps investors away from the crypto market and DeFi platforms, which could weaken the value of AAVE token.
AAVE is the native token of the Aave Protocol and has several applications, including:
AAVE is the governance token of the Aave platform, empowering token holders with the right to submit and vote on critical proposals that impact the functioning of the DeFi project. AAVE token holders can vote on which new assets Aave should support, what future upgrades should be implemented, and more.
Aave users can stake $AAVE on the platform to help secure the protocol. Users can stake AAVE to the Aave Safety Module - a safe backstop against protocol insolvency. For their contributions, they receive a percentage of profits generated from fees by the Aave Protocol as rewards.
You can trade AAVE against other crypto assets to profit from changing market conditions and volatility. Buy or sell Aave tokens against other cryptocurrencies, or hold AAVE if you believe in the long-term potential of Aave Protocol. Review the latest price of Aave, AAVE market cap, circulating supply, 24-hour trading volume, and the latest crypto news before trading Aave in the market.
There are several ways to earn AAVE crypto, including:
Buy or sell AAVE token against other crypto assets to profit from changing market conditions. This is one of the most profitable ways to grow your AAVE holdings, but it could be risky if you are inexperienced in crypto trading. We recommend carefully analyzing and researching the crypto market before trading AAVE.
You can stake AAVE on the Aave app or supported crypto exchanges and platforms. Staking AAVE is a safer option to earn interest in AAVE tokens and grow your holdings. Additionally, staking AAVE on Aave Protocol also enables you to improve the DeFi platform’s security from insolvency and other risks.
KuCoin’s Crypto Lending section lets you earn AAVE risk-free and conveniently. Use this feature to lend liquidity in AAVE on our platform over seven days, 14 days, or 28 days to earn daily interest in AAVE tokens.
The third version of the Aave Protocol, Aave V3, was introduced in November 2021, offering a significant technological upgrade to the leading DeFi platform. Some of the enhancements in the latest version of this platform include the following:
This feature lets supported crypto assets seamlessly flow between various Aave V3 markets on different blockchain networks.
Borrowers can extract the maximum borrowing power from their collateral using this feature.
This feature limits exposure to newly listed assets on Aave, providing a specific debt ceiling for borrowing.
Risk caps and other tools make Aave protocol more secure than before.
This offers a better user experience and reliability on Layer-2 networks that Aave is deployed on.
A more organized codebase drives higher engagement among the community and provides more incentives for participation.
Aave V3 enjoys lower gas fees, bringing down transaction costs by 20-25% overall.
Users can enjoy rewards in multiple tokens on the same transaction made in Aave.
Aave’s decentralized governance system supports adding Risk Admins when updating conditions for listing new tokens.