Aave

The Open Source Lending Protocol

What is AAVE

AAVE is a decentralized protocol for liquidity markets. AAVE is maintained and governed by its native token AAVE. AAVE allows users to deposit and borrow assets from the protocol as well as gain interest by providing liquidity.

How does lending work on AAVE?

Assets deposited into AAVE have a Collateral Factor or a Loan to Value. The Collateral factor is the percentage of value that can be borrowed against a particular asset.

Collateral Factor location in GUI

The AAVE protocol currently does not allow USDT, BUSD, and sUSD as collateral, however, deposits still earn interest.

Liquidation Level

Liquidation Level is the maximum amount of debt that a user can hold against a particular asset. Instadapp calculates the average liquidation level of all the assets supplied to create the Maximum Debt to Collateral Ratio

AAVE Protocol, unlike Compound Finance, uses two parameters to determine the value of assets as deposits (Collateral Factor) and the value of assets as credit. (Liquidation Level)

How do AAVE liquidations work?

If an AAVE position becomes undercollateralized a liquidation process can occur. Liquidations will completely repay the outstanding debt along with a liquidation fee. Liquidation fees are subject to change according to the AAVE protocol.