Credit Protocol Aave (AAVE) is one of the most popular blockchain projects in the DeFi field. With Aave, users can issue and take out crypto loans-quasi banking 2.0. But is an Aave investment still worthwhile? Aave Pro, an offshoot for institutions, has just been announced. In addition, Aave is currently nearly 60% below its all-time high of $ 666.86 reached on May 18. So a rise could be lucrative as crypto markets recover and the DeFi industry also regains momentum. We say: what is aave? How does Aave work? What are the risks of Aave? And: what are the Aave price forecasts for 2021 to 2028?
What is aave (AAVE)?
Aave means “spirit” in Finnish and is one of the most famous DeFi projects. During the DeFi boom in the summer of 2020, Aave was one of the most used projects in terms of the total value of the cryptocurrencies locked in its protocol. But what is aave? Aave is a decentralized financial protocol that allows users to lend and borrow cryptocurrencies. This is how it works: If lenders deposit digital assets (such as Ethereum) into specially created liquidity pools, they receive interest. Borrowers, on the other hand, have the opportunity to deposit their cryptocurrencies as collateral in order to then take out a loan. Aave was launched in 2017 under the name ETHLend. in 2018, the DeFi project was renamed Aave. Founder Stani Kulechov about the rebrand:
“With ETHLend, we were tied to” ETH “and” Lending”. With Aave, we can do much more than that. We also really wanted to build financial products that people need and have some fun doing so. The term “aave” is Finnish for “spirit” – where I originally came from.“
Why is aave (AAVE) special?
Compared to many competing coins, Aave has several unique selling points. Apart from the innovative financial functions that Aave offers, for example, the protocol has been audited and secured. Since Aave is completely open source, anyone can interact with a user interface client, an API, or directly with the smart contracts on the Ethereum network. Advantage “open source”, among other things: anyone can build an application to interact with the Aave protocol.
With Aave you can borrow and lend many different cryptocurrencies, such as Yearn Finance, UNI or DAI. One of the most used features of Aave is “flash loans”. These are also considered the first unsecured loan option in the DeFi area.
Another unique selling point is that Aave allows borrowers to switch between fixed and variable interest rates. The difference: fixed rates provide some certainty about costs, but variable rates are convenient if the borrower expects prices to fall in the near future.
Aave’s value is also defined by the amount of coins available, because similar to Bitcoin, Aaave is very rare. Thus, the supply of Aave is limited to 16 million. Of these, 12.93 million AAVE are currently in circulation. The Aave system also uses the money paid in the form of fees to buy up AAVE and remove the tokens from the circulating supply. Simply put: The number of Aave tokens will automatically decrease. For this operation, Aave uses about 80% of the fees. Lenders in the system receive the remaining 20% used as an incentive.
What is the Aave token?
The AAVE token offers holders discounted fees on the Aave platform and is considered the linchpin of governance at Aave. That means: Holders will thus have a say in the future development of the protocol. You can imagine this as a kind of referendum: If there is something to decide, for example regarding a planned update, AAVE holders come together and vote on it. That being said, users can stake Aave to secure the network.
How does Aave (AAVE) work?
Very simple: To interact with the Aave protocol, simply deposit the preferred asset, e.g. Yearn Finance (YFI), and the desired amount. Once the asset is deposited, you earn a passive income based on what the demand in the market looks like. In addition, there is the possibility of depositing cryptocurrencies and taking out a loan by indicating the asset as a security deposit. All the interest earned by depositing assets also equalizes the interest rate generated by borrowing.
Isn’t it dangerous to deposit your coins with Aave (AAVE)?
Each protocol can theoretically be attacked by an unknown vulnerability. With Aave, however, this risk is largely minimized. Because: The assets are assigned to a smart contract, and the code of this smart contract has been thoroughly checked. It is public, open source, formally verified and audited by external auditors. Users have the option to withdraw their funds from the pool if necessary or to export a tokenized version (aTokens) of the loan position. What’s interesting about this is that these aToken can be moved and traded on Ethereum like any other cryptographic asset.
Are there no risks with aave (AAVE)?
The Aave developers emphasize: No platform can be considered completely risk-free. In the case of the Aave platform, for example, there is the smart contract risk (risk of error in the protocol code) and the recovery risk (risk associated with the recovery process of the collateral). However, the Aave team assures that all possible steps have been taken to minimize risks as much as possible. As mentioned, the protocol code is public and open source, has also been checked. In addition, there is an ongoing bug bounty campaign: anyone who finds bugs in the log will receive a reward for this.
Who invented aave (AAVE)?
Aave or its predecessor ETHLend was invented and founded by Stani Kulechov. The law graduate was unhappy with the range of credit apps on Ethereum – and started developing Aave before the term decentralized finance was even born. Now
What are the Aave price forecasts?
As mentioned, Aave is currently almost 60% below its all-time high. So in the short term, investors could expect some gains once crypto markets recover from their recent downturn. In addition, the developers have announced plans to launch a modified version of the Aave platform for institutional investors in collaboration with crypto custodian and service provider Fireblocks, which could explode the price. It should be ready in July.
In the long term, the Aave forecasts predict the following development for the lending protocol:
- CoinCodex.com is generally neutral on aave: 16 indicators of technical analysis give bullish signals, but 13 bearish signals are opposite.
- WalletInvestor.com Aave anticipates large profit potential in the medium term. The Aave-1 annual forecast sees the coin initially rise to $ 843.50. After that, Aave manages to continuously increase its value: the Aave 5-year forecast predicts an increase to $ 3086.28 by the end of 2026!
- For Aave it goes continuously upwards also at DigitalCoinPrice.com. The Aave forecast predicts an increase to $ 391 in 2021. By the end of 2022, Aave is predicted to rise to $ 472. By the end of 2024, Aave will crack the $ 600 limit at $ 664, and by the end of 2028, it says Digitalcoinprice.com at Aave an increase to up to 1.222 dollars ahead.
- Gov. Capital is also bullish on Aave: according to the Aave 1-year forecast,the DeFi project will initially rise to $ 1,065.78, leaving the old all-time high behind within the next 12 months. Then Aave ignites the price turbo and,according to the forecast, rises to $ 3,450. 06 by the end of 2026!
- The Aave forecast of LongForecast.com expects Aave to decline in the short term: a price of $ 218 is predicted by the end of 2021. Then follow two bullish years for Aave: in 2022 the coin closes at 675 dollars, in 2023 even at 908 dollars. But then the forecast starts to decline again, and in exactly four years the price forecast model Aave sees again at 303 dollars.
Last updated on July 5, 2021
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