What Is Aave?
The birth of the Aave Coin Protocol marks Aave’s shift from a decentralized P2P lending strategy (direct loan relationship between lenders and borrowers, like in ETHLend) to a pool-based strategy. Lenders provide liquidity by depositing cryptocurrencies in a pool contract. Simultaneously, in the same contract, the pooled funds can be borrowed by placing a collateral. Loans do not need to be individually matched, instead they rely on the pooled funds, as well as
the amounts borrowed and their collateral. This enables instant loans with characteristics based on the state of the pool.
Aave Coin Storage Key Points
|Coin Name||Aave Coin|
|Source Code||Click Here To View Source Code|
|Explorers||Click Here To View Explorers|
|Twitter Page||Click Here To Visit Twitter Group|
|Whitepaper||Click Here To View|
|Official Project Website||Click Here To Visit Project Website|
How it Works
1 Submit Aave Request for comment(ARC)
2 Create a snapshot
3 Submit an Aave Request for Improvement(AIP)
The proposal is submitted through a GitHub pull request, and the community votes on approvals
Interest Rate Strategy
The Interest Rate Strategy contract holds the information needed to update the interest rates of a specific reserve. and implements the update of the interest rates. Every Aave Coin reserve has a specific Interest Rate Strategy contract. Specifically, within the base strategy contract Default Reserve InterestRate Strategy.
The rights of the protocol are controlled by the LEND token. Initially, the Aave Protocol will be launched with a decentralized on-chain governance based on the DAOStack framework which will evolve to a fully autonomous protocol. On-chain implies all votes are binding: actions that follow a vote are hard-coded and must be executed.
Flash loans temporarily transfer the funds to a smart contract that respects the Aave Flash Loan Enabled Contract interface. The address of the contract is a parameter of the action. After the funds are transferred, the method executeOperation() is executed on the external contract. The contract can do whatever action is needed with the borrowed funds.
The redeem action allows users to exchange an amount of aTokens for the underlying asset. The actual amount to redeem is calculated using the aToken/underlying exchange rate Ei
in section 3.8.
The Aave Coin deposit action is the simplest one and does not have any particular state check.
After the method execute Operation() is completed, a check is performed to verify that the funds plus fee have been returned to the LendingPool contract. The fee is then accrued to the reserve, and the state of the reserve is updated. If less funds than what was borrowed have been returned to the reserve, the transaction is reverted.
The Aave Protocol relies on a lending pool model to offer high liquidity. Loans are backed by collateral and represented by aTokens, derivative tokens which accrue the interests. The parameters such as interest rate and Loan-To-Value are token specific.
Security & Audits
Aave has been implemented with security as priority. The system has been designed to be safe and secure, and they have spent all the necessary resources in order to ensure that the protocol matches the highest security standards.
The Aave Coin protocol implements a tokenization strategy for liquidity providers. Upon deposit, the depositor receives a corresponding amount of derivative tokens, called Aave Tokens (aTokens for short) that map 1:1 the underlying assets. The balance of aTokens of every depositor grows over time, driven by the perpetual accrual of interest of deposits. aTokens are fully ERC20 compliant. aTokens also natively implement the concept of interest rate redirection.
Indeed, the value accrued over time by the borrowers’ interest rate payments is distinct from the principal value. Once there is a balance of aTokens, the accrued value can be redirected to any address, effectively splitting the balance and the generated interest. They call the continuous flow of accumulated interest over time the interest stream.