Aave (DeFi Project) is an open source and non-custodial protocol enabling the creation of money markets. Users can earn interest on deposits and borrow assets.
Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralized (perpetually) or undercollateralized (one-block liquidity) fashion.
How do I use the service?
In order to use the service, you simply deposit your preferred asset and amount. After depositing, you will earn passive income based on the market borrowing demand. Additionally, depositing assets allows you to borrow by using your deposited assets as a collateral. Any interest you earn by depositing funds helps offset the interest rate you accumulate by borrowing.
What is the cost of the service?
The AAVE DeFi platform has 2 type of fees. From borrowers, a 0.00001% of the loan amount is collected on loan origination, from which 20% is used for referral integrators and 80% is swapped to the LEND token and burned. From Flash Loans, a 0.09% is collected from the loan amount, from which 70% is redirected as extra income for depositors of the protocol and 30% is split using the same 20%/80% model of the origination fee. There are also transaction fees for Ethereum Blockchain usage, these fees depend on the network status and transaction complexity.
Where are my deposited funds stored?
Your funds are allocated in a AAVE smart contract. The code of the smart contract is public, open source, formally verified and audited by third party auditors. You can withdraw your funds from the pool on-demand or export a tokenized (aTokens) version of your lender position. aTokens can be moved and traded as any other cryptographic asset on Ethereum.
Aave (LEND) token
LEND token is used to govern the protocol, we are currently working on the implementation of the governance. Apart from this it will be possible to be staked within the protocol to provide security/insurance to the protocol/depositors and that way earn staking rewards and fees from the protocol.
Also currently LEND token is burnt based on the fees gathered in the protocol, so holders benefit on the reduction of the supply.