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About Aave

About Aave

Aave is an Ethereum-based money market where you can borrow and lend a variety of digital financial assets. Rather than running on a single device such as a PC, Aave runs simultaneously on thousands of machines around the world, meaning there is no one owner.

Ethereum is highly flexible and does much more than just allowing users to transfer digital money. For the avid programmer, it allows you to deploy your own code and interact with other applications created by other users. This decentralised server system means that applications, like Aave, can never be shut down.

Aave was first developed in 2017 by Stani Kulechov and a team of developers who wanted to enable users to lend and borrow cryptocurrencies with each other by allowing you to post loan requests and offers. It essentially allows the you to take more direct role in financial investing by borrowing and lending when and how much you want (within reason).

  • Aave was originally launched as ETHLend; however, after adverse financial conditions in 2018, Kulechov was forced to adjust and rebrand his product as Aave
  • Aave introduced the AAVE token (its own cryptocurrency), which users can submit as collateral to receive a discount on transaction fees. Also, users who borrow AAVE are not charged a fee
  • AAVE holders also gain governance rights over the Aave network, based on the amount of AAVE they own
  • Aave also has a rate switching service to address the volatility of the cryptocurrency market. Borrowers can choose to lock in their interest rates or choose to stick with the floating rates
  • AAVE prices are predicted to increase in value by more than 530% within the next 3 years
How does Aave work?

Aave is an algorithmic money market, which means that loans are added to a pool rather than being individually matched to a lender. The interest rate charged to borrowers is dependent on how often the assets in the pool are utilised. If almost all the assets in the pool are lent out to borrowers, the interest rate will be high to encourage lenders to deposit more capital into the pool. Alternatively, if almost no money is borrowed from the pool, interest rates will be low to entice more borrowing.

To maintain the stability of this cryptocurrency money market, all loans are overcollateralised. For example, if you wanted to borrow $100 worth of cryptocurrency through Aave, you would need to deposit more than that amount into your Aave account. Due to the volatility of cryptocurrencies, if the value of your loan falls beneath the original price (i.e. $100) then your collateral may be liquidated. Before posting collateral and borrowing on Aave, it is important that you understand the risks of depositing funds into the network.

Aave price history

Since the AAVE token was introduced in October 2020, its price has skyrocketed from $56.66 and total volume invested at $59,594 to $599 in May of 2021 with a total invested volume of almost $1,778,000. Although all cryptocurrencies are considered volatile, Aave’s cryptocurrency has remained on a relatively upward trend, never dropping below $302 since February 2021 and currently at its all-time high in value.

What effects the price of Aave?

Financial analysts believe that the drastic rise in AAVE’s price can be attributed to the generalised influx of capital into the De-Fi (decentralised finance) system in recent months. As of January 1st, 2021, the entire De-Fi ecosystem was worth $26.66 billion, a drastic increase from $15.45 billion seen in January 2020. More people are investing in cryptocurrencies than ever before, perhaps a mass socio-economic response to the global pandemic and the perceived instability of the traditional global financial market.

Aave price prediction

Cryptocurrencies are a relatively new phenomenon, only first introduced with Bitcoin in 2009 and truly becoming popular in 2018 as market capitalization peaked at more than $800 billion in January of that year. Since the traditional stock market has been around much longer, computers have become very good at successfully predicting how and why stock prices rise and fall. In comparison to cryptocurrencies, the stock market is more reliable for avid financial investors. Since the DeFi system is significantly less predictable, forecasting any cryptocurrency is quite limiting at best. This is because many cryptocurrency prices are dependent on a variety of variable factors including technological progress, internal competition, pressures on the market, economic problems, security issues, and significant political events.

However, longforecast.com are attempting to do their best. They predict 1 AVAE token will be worth $1423 in January 2022, $3293 in January 2021, $3209 in January 2024, and $1345 in January 2025. So, if you are looking for a cryptocurrency to invest in within the next few months, AAVE should be on your radar (at least until early 2024).

Why choose Aave?

There are several reasons why Aave is a great platform for beginner traders of cryptocurrencies. Not only are AAVE tokens a great investment in 2021, having seen a steady rise in value over the past several months, it is a relatively stable investment when compared with other cryptocurrencies.

One of the great things about the Aave money market is that it’s server system is completely decentralised, meaning that it can never be shut down and is never owned by a single person. The entire money market is completely democratised — the more AAVE tokens that you own, the larger role that you will have in the governance and future role of Aave.

Aave is highly flexible for both borrowers and lenders of various cryptocurrencies. Its flexible interest rate is designed to develop a self-regulated system to match the demand for either money to be loaned or borrowed, which has been perfected through Kulechov’s unique algorithm. Depending on the level of risk the investor is willing to take, each person can choose whether they want to have a static interest rate or one that floats with the value of the cryptocurrency.

Finally, Aave is ideal for all cryptocurrency traders. The platform is simple to use, and for people who are experienced coders, its Ethereum base enables users to develop their own code to interact with Aave and various other platforms.

For anyone looking for an interesting new platform to begin their cryptocurrency journey, or to try an alternative DeFi financial market to explore, Aave is great platform to try out. In addition, if you want to invest in a cryptocurrency which is on an upward trend in value, Aave is worth a look. Its overcollateralised system provides a reasonable safety net for your investment within the highly volatile market of cryptocurrencies.

Frequently asked questions

The AAVE price is a market price. This means that it always reflects the price where there are an equal amount of people who want to buy and sell. In broader terms, Aave' price is of course als tied to the crypto market in general, and Bitcoin in particular. If cryptocurrencies enjoy an euphoric period, then that optimism will tend to lift AAVE up, too.

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