How Does Aave Work?
Posted: Sun Apr 06, 2025 9:17 am
The Aave platform works using Ethereum’s smart contract capabilities. Users can earn interest (staking income) by depositing cryptocurrencies into Aave’s liquidity pools. These pools act as a resource for users looking to borrow money. Borrowers can borrow by offering another cryptocurrency as collateral.
Aave's technical infrastructure consists of special lead the following core components.
Liquidity Pools: These are smart contracts that hold users' deposited cryptocurrencies.
Collateralization: A mechanism that requires borrowers to provide collateral that is worth more than the loan they are borrowing.
Interest Rates: Interest rates are determined algorithmically and change according to the supply-demand balance.
Flash Loans: These are short-term loans that are unsecured and can be taken out and paid back instantly.
Governance Token (AAVE): The token that provides a say in the governance of the Aave protocol.
Aave's technical infrastructure consists of special lead the following core components.
Liquidity Pools: These are smart contracts that hold users' deposited cryptocurrencies.
Collateralization: A mechanism that requires borrowers to provide collateral that is worth more than the loan they are borrowing.
Interest Rates: Interest rates are determined algorithmically and change according to the supply-demand balance.
Flash Loans: These are short-term loans that are unsecured and can be taken out and paid back instantly.
Governance Token (AAVE): The token that provides a say in the governance of the Aave protocol.