Aave DeFi Review: Earn Interest & Borrow Assets

Aave (aave.com) is the Finnish term for ghost. The term conveys the company’s open and transparent framework. The decentralized platform is a DeFi lending protocol that allows members to lend and borrow over 35 cryptocurrencies. Standard features are offered, as well as unique products and tools, such as uncollateralized loans, rate switching, and collateral swaps. At the time of writing, Aave boasts almost $11 billion of liquidity across 7 networks and over 13 markets. Let’s dive deeper into this popular crypto lending and borrowing platform below.

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Aave At-A-Glance

Products	Crypto lending pools Crypto loans
# of Cryptocurrencies	35+
Supported Wallets	Ethereum Mainnet Polygon Mainnet
Customer Support	Email, Discord, Telegram, Twitter, Instagram
Promotions	None

Aave Features

Powered by the Ethereum blockchain, Aave is a DeFi platform that runs a non-custodial money market involving borrowers and lenders (or depositors). Lenders contribute to lending pools, earning interest on their deposits and allowing borrowers to take out loans. Since there is no “middle man” involved, KYC and AML verification are not required to use the platform.

Whenever you deposit funds, as a lender or as collateral when borrowing, you earn the equivalent amount in aTokens. These are interest-earning tokens. For every second that passes, a small fraction is added to your wallet, in accordance with the APR interest rate for the underlying asset, and you can withdraw your aTokens for the equivalent amount of the underlying asset.

Another convenient feature is Aave Pay, which allows European residents to withdraw their crypto and send money quickly in fiat currency.

But perhaps what Aave is most famous for are their flash loans. This feature lets users borrow a small amount of assets with absolutely no collateral. The cryptocurrency must be paid back by the time the next Ethereum block has been mined. If you miss the deadline, every transaction you made in that span of time will be canceled. Please note, there is a 0.3% fee for every flash loan.

Lending On Aave

Aave provides many lending pools where members can earn interest on their digital assets. Simply connect your Ethereum wallet to the platform and select which asset you want to lend. Each lending pool puts aside a small percentage of assets as a reserve to hedge against possible volatility within the protocol and allows lenders to conveniently withdraw funds at any time.

Unique to Aave, members can switch between stable and variable interest rates, allowing you to get the best return on your deposits. Interest is accrued by the second, and you can see it clearly on your dashboard in real-time. Keep in mind, switching rates will incur a gas fee every time.

Borrowing on Aave

In order to borrow on Aave, you must deposit collateral. The amount of the required collateral is larger than the amount being withdrawn, between 50% to 75% depending on the asset. The loan comes out of the lending pool.

Should the USD value of your collateral fall below the collateralization threshold, your funds will post for liquidation.

Unlike most other decentralized platforms, Aave allows for collateral swaps. You might use this feature if you want to execute a short position or refinance your debt to get a better rate.

Aave Security

Because Aave is a decentralized platform, members retain complete custody and control over their assets. This structure is lower risk than other types of platforms, which require you to hand over custody of your tokens to the exchange.

Aave is also fully transparent with their ecosystem, tokenomics, and governance. Their open-source approach creates a high sense of trust within the community and provides proof that the platform ensures not just liquidity, but also strong reserves.

Aave constantly does audits to check for vulnerabilities. The company also has a bug bounty program with a reward of up to $250,000 for those who report critical bugs and vulnerabilities.

Bottom Line

Aave provides easy and instant ways to lend digital assets and earn interest, as well as easy and instant ways to take out crypto loans. Unique features include uncollateralized loans, rate switching, and collateral swaps.

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