There are many people who wonder how they can use the products of Decentralized Finance (DeFi) as they have given a new life to our traditional finance market along with the crypto space. There are various lending platforms available and one among them is Aave. In this article, we are going to learn about how to use Aave.
Brief History Of Aave
Before this lending platform was named Aave, this protocol was operated with the name of ETHLend. This platform was envisioned by developer Stanley Kulechov. ETHLend aimed to link borrowers and lenders with the request of loans that matched up. When ETHLend required reimagining for staying afloat, it was renamed Aave in 2020, using algorithmic determination and liquidity pools of interest rates, giving rise to what is presently the giant of DeFi presently. So now if you are wondering how to use Aave to make money, then you are at the right place.
The Rise Of Aave
Before you know how to use Aave, it is important for you to know how this name is presently ruling the market. This platform has risen among digital currency enthusiasts as a nice application for the upcoming generation of Decentralized Finance. Along with lending, yield, and staking protocols that are associated with the normal DeFi applications, this platform caught the attention of the crypto space by introducing flash loans, which are generally smart contract loans that can offer you with no collateral that you are required to pay back within a few minutes. If you are wondering how to use Aave flash loans, you will get many articles on that.
Primarily, one would wonder, how can they receive a loan for nothing and what the point of it is in paying back the loan in such a strict deadline. With DeFi being operated by smart contracts rather than centralized bodies, a huge space of opportunities opens up. Those few seconds or minutes can imply everything when you will be trying to implement strategies that traditional finance would not normally recognize, thus creating things like flash loans that have advantages that traditional finance cannot offer.
Use Aave: Basic Things Required
Now that you have got some idea of what Aave is and why it is so important in the DeFi space, let us begin with how to use Aave. But before that, there are two very basic yet important things required for any user to do. We will first discuss those and then go on how to use Aave on mobile and on desktop.
Connecting An Online Wallet
Before we get started, you will require to connect a wallet to Aave for using any of its characteristics. Like many other DeFi apps, a MetaMask wallet would satisfy, but you can also use other wallets such as Coinbase wallet, or others. You can also use Aave with Ledger.
Depositing Funds on Aave
To borrow, stake, swap, or have any voting power in the governance of Aave, you require to have some crypto stored into Aave. For doing so, select the deposit tab above the Aave protocol once you are connected with your wallet. From here, it will spot which digital currencies you have in your account.
How To Use Aave For Staking?
For staking and use of Aave tokens, ensure that you already have Aave tokens in your wallet, which you can receive by using a DEX (decentralized exchange) like Uniswap. Once you have the required amount, you can insert the amount you wish to stake in the box provided and click the button.
On the right side, it previews the Aave every month that you would have got via staking. It also previews the Cooldown span, which implies when you get your tokens after aiming to take them out of staking. This time period exists so that the network can quickly take care of any tokens that are taken out without impacting the integrity of the network.
Next, you will see the APY (annual percentage yield) you will get while staking. The slashing portrays how much stake you can miss in the exceedingly rare event of the network becoming damaged and having to slash away tokens for its integrity.
How To Use Aave For Borrowing?
Depositing tokens enables you to borrow cryptos on Aave. In the borrow section, you will see a list of tokens that can be borrowed, the number of tokens you will be able to borrow, and also the stable and variable APY. If you select one of the tokens, you will be taken to the next page with data about your selected token.
The rate of utilization informs you of the amount that the selected asset is being borrowed in comparison to the sum that is accessible for borrowing. The higher the amount is, the more the digital asset is being borrowed and the higher the rate of interest the borrower has to pay. The liquidity that is available is how much you are eligible to borrow, and the asset value is the present market price of your selected token.
The choice for variable or stable rates is a factor that Aave became famous for. At the cost of paying extra for your borrowed digital asset, you have the ability to stabilize the APY, making the rate of loan predictable, at a much higher cost. If you think that the market scenario will alter, this is a convenient option to have. Or else, you can avail a variable APY much like most other decentralized finance apps if you think stabilization will be expensive.
The Closing Lines
Even though it had just been renamed in 2020, Aave has already engraved a name for itself with its magnificent array of options. With more than USD 20 billion worth of assets in this platform at the time of writing, this platform circulates a huge amount in the DeFi arena. As it prevails to climb the ranks in DeFi protocols and cover its usefulness in the crypto space, we could possibly be talking about Aave in the upcoming as among the most innovative decentralized finance platforms of the present dApp landscape. In the above article, we have discussed how to use Aave.