Aave (AAVE) is a decentralized finance (DeFi) protocol that allows users to lend and borrow cryptocurrencies across different networks. Founded in 2017 by Stani Kulechov as ETHLend, the platform rebranded to Aave and transitioned to a liquidity pool model. Over time, Aave has introduced multiple upgrades, including versions V2 and V3, and launched the GHO stablecoin. The governance system has also evolved with Aave Governance V3.
What Is Aave (AAVE)?
Aave enables users to lend and borrow cryptocurrencies on networks like Ethereum, Avalanche, and Arbitrum. Initially launched as ETHLend in 2017 for peer-to-peer lending, the platform raised funds through an ICO. In September 2018, it rebranded to Aave, shifting to a liquidity pool model. The first version, Aave V1, launched on January 8, 2020, allowing users to earn interest on deposits and borrow various assets. By December 24, 2022, a proposal, AIP, froze most of Aave V1’s reserves, restricting new loans but allowing debt repayments and collateral withdrawals.
Aave V2 launched on December 3, 2020, introducing aTokens, collateralized debt repayments, improved flash loans, and collateral swaps. In March 2021, the V2 upgrade included Automated Market Maker (AMM) markets, enabling certain decentralized exchange liquidity provider tokens. The governance system evolved with Aave Governance V2, empowering AAVE stakers with governance rights and introducing Aave Guardian, a multi-signature asset with veto and pause powers.
How Did Aave Expand Its Offerings?
In November 2021, Aave introduced Aave Arc, a permissioned version for whitelisted financial institutions. The same year, Aave collaborated with Centrifuge to launch liquidity markets for real-world assets (RWAs). Aave V3 debuted on March 16, 2022, initially on networks like Polygon, Fantom, Avalanche, and later on Ethereum. As of July 2024, Aave V3 operates across multiple networks, including Ethereum, Avalanche, Optimism, Polygon, Arbitrum, Metis, Base, Gnosis, Harmony, and BNB Smart Chain, with some assets frozen due to cross-bridge vulnerabilities.
On July 7, 2022, Aave announced GHO, an over-collateralized, multi-collateral stablecoin pegged to USD. The stablecoin went live on Ethereum on July 15, 2023, following AIP-268’s approval. Users can borrow GHO using their crypto assets as collateral on Aave V3 liquidity pools. In January 2023, GHO was added to Aave’s Security Module as a stakeable asset.
Key Takeaways for Users
Practical Insights
- Aave V2 and V3 offer advanced features like flash loans and automated market maker integration, enhancing user experience.
- The Aave governance system allows token holders to influence protocol decisions, adding a layer of decentralized management.
- GHO stablecoin provides an option for borrowing against multiple collateral types, offering flexibility in asset management.
Conclusion
Aave has significantly evolved since its inception, continually enhancing its platform with new features and governance updates. The protocol’s focus on innovation and user empowerment has made it a key player in the DeFi space. The introduction of GHO stablecoin and the latest version, Aave V3, demonstrate its commitment to providing a versatile and secure environment for cryptocurrency lending and borrowing.