The World Bank of DeFi.
Maybe you are tired of all the paperwork in the bank. Or maybe you want your money to work further for you, then keep reading further.
From a lender’s perspective: Just like what our parents taught us, instead of having your money on your piggy bank dying of inflation, put it to the bank where it can earn interest.
From a borrower’s perspective: To buy a house, you have to have an initial down payment, and the house will act as your collateral where the bank gets the house if you’re not able to comply with the terms of the payment.
AAVE’s just like that, except AAVE is more like asking your mom to lend you some money. AAVE is a decentralized lending-borrowing protocol built on Ethereum. The protocol is open-sourced; anyone can build a third-party service to interact with it. It is also MixBytes, CertiK, ConsenSys Diligence, and PeckShield-audited.
NOTE: The article does not constitute investment advice. BitPinas is not responsible for your loss nor take any credit from any gains you receive. Always do your research when trying out crypto products and platforms.
How to Buy Aave in the Philippines
Aaveis one of the cryptocurrencies launched on PDAX, a leading locally licensed order book crypto exchange in the Philippines in June 2021.
1) If you haven’t yet, sign up for a PDAX account.
2) Verify your account.
3) Fund your account with Pesos.
Go to Funds > Payment In > PHP > Cash In > [Payment Channel]
Once the funds are in the account, go to the order book platform.
4) Find the AAVEPHP pair.
5) Trade your PHP to PHP.
If on the mobile app, the user can trade on Basic Mode, which allows the user to quickly convert Pesos to AAVE.
Early Days of Aave, What is EthLend?
With DeFi projects costing lesser capital and lesser manpower than banks, a lawyer was able to launch ETHLend last 2017. Then, an Initial Coin Offering (ICO) at the end of that year raised money for ETHLend’s further development. Their Peer to Peer (P2P) model was inefficient thus they adopted the Peer to Contract (P2C) model where users interact with pooled funds instead of looking for another person to transact with. They then rebranded as AAVE which meant ghost in Finnish. AAVE is now the leading decentralized lending platform with over $16 billion in Total Value Locked (TVL), representing the total amount secured in the smart contract.
What are the usecases of Aave?
Just like in any lending banks, there are depositors and borrowers where the borrower gives a collateral and pays a certain interest to the depositors in exchange for the lump sum they have gotten. Take for example, you as a depositor lends the protocol your stablecoin, USDT, which will give you a 1:1 stkAAVE token of your given token (e.g., aUSDT) which will generate 2% APY as of writing. APY is determined by supply and demand. This is a much lower risk passive income for conservative investors.
If you are the borrower in the Aave protocol, unlike in banks, this is over-collateralized where your collateral should be higher than what you will borrow. This enables AAVE to protect their depositors from not getting paid. You can use this as a closed loop where you borrow some tokens and lend it back to the liquidity protocol to earn more interest as a lender, this is called leverage lending. Other than that, there is a possibility that your collateralized token (that is not a stablecoin) will go up in price. However, you must be careful of liquidation. If you want to play it a bit safer, you may borrow and lend stablecoins instead of other tokens.
What is a flash loan? Here there is no need to provide a collateral, but you must borrow and repay on the same blockchain transaction. Flash loan paved way to AAVEV2’s “Collateral Swap” where you can swap your collateral into another collateral in case of a possible liquidation in the future. Also, arbitrage, where you can take advantage of different pricing of the same asset in different market. This is also useful in self-liquidation to generate funds from its own operations to repay investments.
Aavegotchi is an NFT game much like your tamagochi. You buy your “pet” or “fren” with your gained stkAAVE. Except here, your care and love are not the one contributing to the “growth” of your “fren” but your crypto by equipping it with potions, items, etc. Also, the only growth is not only on your Aavegotchi but also on your crypto.
Why AAVE VS other lending protocols:
Compared to other lending protocols, AAVE offers a larger number of crypto assets in its pool. AAVE also allows a higher borrowing amount compared to collateral. Flash Loans are also available on AAVE. AAVE also offers higher rates than many other lending protocols.
Points to Consider About Aave
On the protocol:
UK Financial Contact Authority (FCA) granted AAVE with an electronic money license allowing it to become a fiat gateway. They are working on getting more licenses to make it possible to buy assets in AAVE using fiat.
Improvements such as AAVE’s bridge to Polygon which made their transaction speed and transaction fees lower, debt repayment using collateral, debt tokenization, and AAVENOMICS is just the beginning of more improvements to come as AAVE seems to show no sign of stopping an active community that holds most of AAVE’s circulating supply. AAVE recently launched AAVE Pro this July 2021 to provide a private pool for institutional investors which may increase AAVE’s TVL further.
On the token:
If you let someone dictate what they do with your money, you are probably not going to have a great time. There would be times that they would be using a band aid instead of an actual solution which then results in a bigger problem in the future. Take for example the 2008 financial crisis. This is one of the problems DeFi is trying to solve. More specifically, in AAVE’s AAVENOMIC’s, it allows token holders to participate in the governance of the protocol. In short, they can vote on the changes to the protocol. You can check AIPs (Aave Improvement Proposal) implemented, proposed, currently in work-in-progress, and rejected improvements on: https://aave.github.io/aip/.
AAVENOMIC’s Safety Module protocol allows one to stake their AAVE token for rewards which are secured in case of a major short-fall event.
Just as the name “AAVE” means ghost in Finnish, will this token stick as something that just passed or something that haunts?
Note: The article does not constitute investment advice. BitPinas is not responsible for your loss nor take any credit from any gains you receive. Always do your research when trying out crypto products and platforms.
This article is published on BitPinas.com: What is Aave | Where to Buy AAVE in the Philippines