Aave is a decentralised non-custodial liquidity market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralised (perpetually) or undercollateralised (one-block liquidity) fashion.
Please join the Aave community Discord server; the Aave team and members of the community look forward to helping you understand and use Aave.
This video may help you as introduction to the protocol:
The Aave Protocol has been audited and secured. The protocol is completely open source, which allows anyone to interact with the user interface client, API or directly with the smart contracts on the Ethereum network. Being open source means that you are able to build any third-party service or application to interact with the protocol and enrich your product.
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.
The platform has 2 type of fees. From borrowers, a 0.00001% of the loan amount is collected on loan origination (only in V1), from which 20% is used for referral integrators and 80% is allocated in the protocol fund. 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, which depend on the network status and transaction complexity.
Your funds are allocated in a 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 tokenised (aTokens) version of your lender position. aTokens can be moved and traded as any other cryptographic asset on Ethereum.
No platform can be considered entirely risk free. The risks related to the Aave platform are the smart contract risk (risk of a bug within the protocol code) and liquidation risk (risk on the collateral liquidation process). Every possible step has been taken to minimise the risk as much as possible-- the protocol code is public and open source and it has been audited. Additionally, there is an ongoing bug bounty campaign live and running. You can find additional risk and security related information in the risk framework and security and audits sections.
AAVE is used as the centre of gravity of Aave Protocol governance. AAVE is used to vote and decide on the outcome of Aave Improvement Proposals (AIPs). Apart from this, AAVE can be staked within the protocol Safety Module to provide security/insurance to the protocol/depositors. Stakers earn staking rewards and fees from the protocol. Documentation on tokenomics and governance is available in the flash paper and with further detail in the full documentation. Feel free to join the discussion in the governance forum.
If you are unsure about any specific terms feel free to check the Glossary.
Feel free to refer to the White Paper for a deeper dive into Aave Protocol mechanisms. Developers can access the Documentation for a technical description of the Aave decentralised lending pool protocol. For a detailed risk analysis, please visit the risk framework.