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Introduction to Aave
Aave is a decentralised non-custodial liquidity market protocol where users can participate as suppliers or borrowers. Suppliers 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.
Aave Protocol has been audited and secured. The protocol is completely open source, which allows anyone to interact with a 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 interact with Aave protocol, you simply supply your preferred asset and amount. After supplying, you will earn passive income based on the market borrowing demand. Additionally, supplying assets allows you to borrow by using your supplied assets as a collateral. Any interest you earn by supplying funds helps offset the interest rate you accumulate by borrowing.
Interacting with the protocol requires transactions and so 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.
We receive blockchain intelligence provided by TRM Labs. TRM combines on-chain data and real-world investigations to identify financial crime and other prohibited activities. This data blocks wallets from app.aave.com that are associated with certain legally prohibited conduct.
What information is shared with TRM Labs?
Your address is shared with TRM, but no metadata is tracked or shared. The request from the UI is routed to the Aave hosted API, which is used as a proxy endpoint, and the address is passed directly through to the TRM service. Users' IP addresses are not shared with TRM.
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/suppliers. 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.
Be careful, Aave doesn't have any downloadable mobile application available. If you find one, it is a scam. Aave Protocol would not ask for your seed passphrase ever. Aave never advertises on any social media or search engine. If you see any advertisement, those are scams and phishing sites.