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DeFi Ethereum

What is AAVE token used for?

A simple explanation of how Aave and the LEND token works. LEND is the governance token of the Aave protocol and liquidity pools.

AAVE token


AAVE is the governance token for the Aave protocol (replacing the LEND token at 100:1).

AAVE is used for


  • Voting
  • Staking for security of the protocol

How could value accrue to AAVE token?


Locking

  • Holders receive rewards and cash flow from fees by locking and securing the protocol

Fees & rewards

  • Rewards in AAVE from staking in the Safety Module
  • Trading fees from the protocol to stakers
  • BAL Tokens + trading fees from ETH/AAVE Balancer pool tokens

What is Aave?


Aave is a protocol for lending and borrowing on Ethereum.

More on Aave lending and borrowing here.

Aavenomics


Depositing any token or ETH generates aTokens (for example aETH).

  • aTokens are interest-bearing and are minted and burned upon deposit and withdraw.
  • aTokens’ value correspond to deposited asset at a 1:1 ratio.
  • Can be stored, transferred or traded.
  • All interest collected by the aTokens reserves are distributed to aTokens holders directly by continuously increasing their wallet balance

Current interest rates are visible the site.

New in AAVE v2

  • Yield & Collateral swap – Swap between any collateral in the protocol. Useful for avoiding liquidations when price of an asset goes down.
  • Repayment with collateral – repay loans in 1-click.
  • Flash liquidations – Batching, liquidate loans without capital and more.
  • Debt Tokenization – Enables credit delegation.
  • Credit delegation – Delegate collateral to enable undercollateralized loans. Use for example OpenLaw for the loan agreement.
  • Gas optimization – 50%
  • Stable & Variable Rate Borrowing – Switch between rates.

Aavenomics is a governance framework to AAVE tokenholders.

  • A Safety Module (SM) for staked AAVE to act as collateral of last resort.
  • Delegate collateral for undercollateralized loans
  • Governance defines a set of Policies for parameters of Aave.

Governance is implemented through on-chain Aave Improvement proposals (AIP) and discussed in the governance forums.

Docs


AAVE token issuance


Total supply: 16 million

  • LEND migration: 13 million – LEND swapped in October 2020 to AAVE at a rate of 100:1 (81.25%)
  • Treasury fund: 3 million to the “Aave Ecosystem Reserve”, which will reward future ecosystem participants (18.75%)

Original LEND issuance

  • Total supply: 1 300 000 000
  • ICO: 1 000 000 000
  • Median price: $0.0162 ($1.62 in AAVE)
  • Founders and Development: 300 000 000 (24 months vesting)

AAVE Price


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