Aave protocol
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The Aave protocol is an open-source decentralized finance protocol built on the Ethereum blockchain. It uses a set of smart contracts to automate borrowing and supplying tokenized assets on multiple markets. The protocol facilitates the ability for users to borrow and supply cryptocurrency assets across Ethereum, Polygon, Avalanche, and other EVM blockchains by posting collateral.[1][2]
Based on total value locked, Aave is the top lending protocol in decentralized finance.[3]
History[edit]
Aave Protocol was released on the Ethereum Mainnet in 2020 by Stani Kulechov. It was the second iteration of a decentralized lending protocol and followed in the footsteps of ETHLend, the first decentralized financial marketplace that used smart contracts to facilitate peer-to-peer lending agreements.[4] In 2020, Aave transferred ownership of the protocol over to its community, establishing the Aave Decentralized Autonomous Organization (DAO).[5] Changes to the protocol are voted on by the holders of a native cryptocurrency and governance token called AAVE, and then executed by a group of developers.[6] The market capitalization for the AAVE token is over USD 800 million.
Protocol[edit]
Aave Protocol allows users with a crypto wallet to supply and borrow cryptocurrency assets without third-party intermediaries such as banks and brokerages. Users earn interest by supplying cryptocurrency assets into different liquidity pools. In turn, suppliers can use their crypto assets as collateral to borrow at stable or variable interest rates.
Version History[edit]
| Date | Description |
|---|---|
| October 2019 | Aave V1 Public Test Net[7] |
| January 2020 | Aave V1 live on Ethereum Mainnet[7] |
| October 2020 | AAVE Token live on Ethereum Mainnet |
| December 2020 | Aave V2 live on Ethereum Mainnet[8] |
| March 2020 | Aave V2 live on Layer 2 Mainnet |
| March 2022 | Aave V3 on L2 Networks, Avalanche[9] |
| January 2023 | Aave V3 on Ethereum Mainnet |
Aave V1[edit]
Aave V1 included innovations such as “flash loans”, a DeFi transaction in which a user can borrow crypto assets from the protocol without also being a supplier given the way in which the transactions work such that the borrow and repayment occur within the same block.
Aave V2[edit]
Aave V2 was deployed December 2020 and supports Ethereum natively, plus Polygon and Avalanche. V2 introduced flash liquidations, repayment with collateral, native credit delegation and debt tokenization amongst other capabilities.
Aave V3[edit]
Aave V3 launched in March 2022 and originally supported only Ethereum layer 2 networks and other layer 1 blockchains including Arbitrum, Avalanche, Fantom, Harmony, Optimism, and Polygon.[10][11]
Institutional Adoption[edit]
Aave Arc[edit]
In July 2022, 30 fintechs and institutions joined Aave Arc, an institutional version of its lending protocol that utilizes smart contracts to restrict access to permissioned entities.[12]
JP Morgan[edit]
JPMorgan Chase executed its first trade on a public blockchain using a modified version of the Aave Protocol.[13] The first live cross-border transaction used the Layer 2 Ethereum blockchain, Polygon, to trade tokenized cash deposits and was facilitated by the Monetary Authority of Singapore's (MAS) as part of a pilot program to "explore potential DeFi applications in wholesale funding markets."[14]
Licenses[edit]
Aave was given an Electronic Money Institution license in July 2020 by the U.K.'s Financial Conduct Authority (FCA).[15][16]
References[edit]
- ↑ "What are flash loan attacks — the phenomenon behind the latest $182 million hack". cnbctv18.com. 2022-04-20. Retrieved 2023-09-05.
- ↑ "Aave CEO addresses crypto's liquidity issues". CNBC. Retrieved 2023-09-06.
- ↑ "Biggest DeFi Lender Aave Set to Launch Decentralized Stablecoin". Bloomberg.com. 2023-07-15. Retrieved 2023-09-05.
- ↑ Lee, Sherman. "Decentralized Lending Promises Easy And Global Access To Credit, But Is It Too Good To Be True?". Forbes. Retrieved 2023-09-05.
- ↑ Foxley, William (2020-07-29). "DeFi Lender Aave Rolls Out Governance Token on Path to Decentralization". www.coindesk.com. Retrieved 2023-09-05.
- ↑ "The surprising maturity of the crypto-rave crowd". The Economist. ISSN 0013-0613. Retrieved 2023-09-06.
- ↑ 7.0 7.1 Aave Protocol ·, Aave, 2023-09-05, retrieved 2023-09-05
- ↑ Aave Protocol v2, Aave, 2023-08-31, retrieved 2023-09-05
- ↑ Aave Protocol v3, Aave, 2023-09-04, retrieved 2023-09-05
- ↑ "Aave V3 is About to Pass in Governance Vote". Yahoo Finance. 2021-11-04. Retrieved 2023-09-05.
- ↑ "DeFi Platform Aave Lauches Version 3 With Cross-Chain Swaps Front and Center". Yahoo Finance. 2022-03-16. Retrieved 2023-09-05.
- ↑ "Aave's New Platform Attracts 30 Institutional Players in Big Push for Growth". Yahoo Finance. 2022-01-05. Retrieved 2023-09-05.
- ↑ "JPMorgan Executes Its First DeFi Trade Using Public Blockchain". Bloomberg.com. 2022-11-02. Retrieved 2023-09-05.
- ↑ Bambrough, Billy. "'A Massive Step'—JPMorgan Just Made A Surprise, Game-Changing Bet On Crypto Despite $2 Trillion Bitcoin, Ethereum And Crypto Price Crash". Forbes. Retrieved 2023-09-06.
- ↑ Bambrough, Billy. "How Brexit Could Help London Evolve From A Fintech Center Into A DeFi Hub". Forbes. Retrieved 2023-09-06.
- ↑ "NewRegister". register.fca.org.uk. Retrieved 2023-09-06.
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