Aave is a token linked to a loan platform called ETHLend (rebranded to Aave).
What Is Aave?
Aave is a token linked to a loan platform called ETHLend (rebranded to Aave). The basic idea of Aave is to take advantage of blockchain and cryptocurrencies to create a microcredit platform. It works on Ethereum with ERC-20 type token and, therefore, its operation is linked to smart contracts.
Aave's main objective is to make microcredit a democratic tool for everyone, even for those who do not have bank accounts or special guarantees. This crypto allows anyone to lend or borrow money in fiat or digital currency, providing security warrants for both the borrower and the lender, thus removing the monopoly of the credit sector, especially microcredits from banks.
When applying for a loan, the Aave platform activates a smart contract that, completely independently, ensures that the applicant receives the pre-established amount and that he has all the necessary guarantees to return it on a fixed date with the addition of commissions reserved to the established creditor.
Pros and Cons of Aave
Advantages of Aave
The transactions that take place are secure and encrypted thanks to the blockchain. For loan applicants, fees will be considerably lower than those offered by banks. An advantage for lenders is the opportunity to generate with total peace of mind the benefits derived from the loan granted and, therefore, a new source of income.
Disadvantages of Aave
However, the value of AAVE tokens will be highly influenced by the level of success that the AAVE platform achieves. The more users and the final volume it attracts, the more valuable the tokens will be. Aave is also not the only company offering loans and other blockchain-based banking services, so one should consider its competitors, such as SALT and WeTrust. Another thing to consider is Aave's future plans and whether AAVE tokens go up or down in value in the months and years ahead.
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