Decentralized finance will change the way billions of people worldwide perceive finance. It gives us financial freedom as ordinary citizens. Banks have been paving the way for hundreds of years, and centralized finance has become an invisible force. We control every aspect of our lives. But now, the banks are slowly but surely losing control. And today, I will talk about one of the most exciting and promising projects in the spacious basement, AAVE.
AAVE is a decentralized lending platform that allows users to borrow and earn interest on crypto assets. When using AAVE, no intermediaries are required as the entire system operates independently via Ethereum’s smart contracts.
Their main goal is to transform centralized financial services into decentralized ones. The network currently supports 28 different peek assets, including Ethereum, USDC, USDT, and Chainlink. The last time I checked AAVE was two months ago, and it had a total of 17 assets. So, they are growing.
AAVE means ghost at the end. It entered the market in 2017. Although the platform was the first DeFi Landing protocol, it went under a completely different name: ETH Land.
AAVE Price Development
This year’s AAVE has been excellent. It is a six-fold increase in 40 days from January 1. Then they will get some profit. In April, the reclaimed landfill market hit an all-time high May, fueled by an overall bull market. It has since declined along with the rest of the market.
During the summer, there were some significant announcements, and AAVE started rising again in mid-July before Bitcoin began rising again. And I’ll come back for the summer presentation and talk about what we’re gearing up for towards the end of AAVE.
Let’s see how lending and lending work in a traditional bank. It will give you a basic level of understanding before we talk about AAVE. The bank doesn’t just have the cash you have in your account, nor does it have some money when you ask for a loan.
What Problems AAVE Solves
Manage your cash balance, so you don’t have more money than your business needs. Cash that you and other customers put in the bank for interest, and as a token of appreciation, they give you a small reward. I checked this with my bank, and I am currently getting 0.6% interest on my best savings account.
The same is true if you need to borrow money. Banks do not depend on cash. Woori Bank offers a mortgage interest rate of 2.29%, and the European Central Bank’s interest rate for banks is currently around 0%. Your bank is an intermediary that makes money when you lend them money. And then you want to borrow money, and besides, it’s not easy, and it’s time-consuming.
To work around this problem and remove the broker. There are many P2P lending companies. If you search for P2P lending, you will see many similar services. These companies often have something called a credit pool. All the money people want to borrow goes into the pool. And people borrow money from this pool. And it minimizes risk compared to directly hiring human resources.
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