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Blockchain Gaming Thrived In 2020, What Does The Future Hold?

Blockchain Gaming Thrived In 2020, What Does The Future Hold?

Blockchain Gaming Thrived In 2020, What Does The Future Hold?

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Blockchain gaming enjoyed significant growth in 2020. Notably, last year was major for most categories in the blockchain dApp industry. However, that picture was vivid when it comes to blockchain gaming.

A Year Of Growth

There was growth in 2020. The decentralized finance (DeFi) category was the dominant catalyst for the general crypto market with $15 billion of locked value by the end of last year. In other sectors of the crypto space, growth was sporadic and pushed more by the dynamics of individual products instead of widespread growth across the industry.

https://d229noksprj98s.cloudfront.net/wp-content/uploads/2021/01/blockchain-gaming-thrived-in-2020-what-does-the-future-hold.jpg

Notably, the average total daily active unique wallets spread across all blockchain games tracked by DappRadar in December was 27,765. That number was up 35% compared to an average of 20,585 in January to reach 28,000 DAUWs.

The growth was achieved despite the general decline in activity for Ethereum games from May 2020 onwards. The analysis shows that the decline happened after gas transaction fees became highly expensive as a result of the DeFi boom.
Between January and December, the daily activity across all Ethereum games plunged by 45%. Nonetheless, a review on a per-product basis shows a radically different situation:

At some point in 2020, all these were within the most popular games which shows varying and volatile audience engagement.

https://d229noksprj98s.cloudfront.net/wp-content/uploads/2021/01/blockchain-gaming-thrived-in-2020-what-does-the-future-hold-1.jpg

Last year, EOS dominated the blockchain gaming sector commanding 35% of all daily active unique wallets. Hive sliced some 17% of the market, Ethereum accounted for 14%, Thundercore got 10%, while WAX took 9%.

Dominant Performers

There was diverse audience variation that was experienced by many blockchain games last year. Some of the games performed better than others with their features and events influencing daily activity trends.

The most popular blockchain game of 2020 is Splinterlands. Its main highlight was its decision to switch from the Steem blockchain to operate on its hard forked version Hive.

https://d229noksprj98s.cloudfront.net/wp-content/uploads/2021/01/blockchain-gaming-thrived-in-2020-what-does-the-future-hold-2.jpg

Audience volatility was experienced in the project’s transition period in late May. However, Splinterlands got into a period of massive growth between early June and mid-August as new players joined the space. Also, the growth was underpinned by older players who got re-engaged by the publicity triggered by the switch.

No single event can be said to have catalyzed the year-long growth of the Upland mobile game.

Blockchain gaming

Its incredible momentum started to accelerate as it began to roll out its marketing campaign and added features like new locations and fiat cash-out features.

The growth that was experienced by the Axie Infinity was linked to external events and forces, mainly the SLP token price that spiked 499% in early July.

Blockchain gaming

Interest in this game surged further from September triggered by the top price paid for its rarest Mystic Axie’s NFTs appreciated from 150 ETH to 300 ETH in just two months. That price increase is likely driven by a growing interest in the game.

But, in these three cases, analysts must be careful not to assume all of such events are directly casual to user growth.

Altering Values

Daily activity did not grow significantly in 2020. However, the situation seemed quite positive with regard to total trading value.

In the case of blockchain gaming, annual growth was recorded at 191% surging from a $59,500 daily average in January to $173,500 by the end of December. It totaled around $54 million.

Nonetheless, all that is put into context considering the USD value of ETH rose by 470% during the time. Therefore, it means that the daily trading volumes decreased when analyzed on an ETH-basis.

This contradictory behavior can be explained to some extent since the cheaper game NFTs are psychologically valued in dollars by the traders. They take that strategy since they are worried about short-term value.

In the meantime, the more expensive NFTs attract high-net-worth cryptocurrency investors. They are priced in Ether since they are perceived to be long-term assets whose value is linked to the wider trends in crypto adoption.

But, the interplay between the two trends is complex with regards to individual games and across the whole industry.

Blockchain gaming

It is also worth noting that there was a major rise in crypto art trading in the second half of 2020. Nevertheless, the trading of various game assets remains the biggest single driver of activity on marketplaces like OpenSea.

In January, there were about 1,050 daily active unique wallets that interacted with the marketplaces on average. By December, the number had soared by 226% to a daily average of about 3,400 with massive growth recorded from October onwards.

On the other hand, value growth for marketplaces in terms of dollars gained 785%, totaling $78 million, which is considerably more than ETH grew. The value grew from a daily average of $48,400 in January to almost $437,000 in December.

This particular activity accelerated in Q3 2020 as profits from DeFi flowed into the industry.

Ethereum Rules

Data analysis shows that Ethereum was the primary trigger of general growth in 2020. All games, blockchains, and marketplaces accounted for $132 million of trading value. Non-Ethereum marketplaces had 4% and non-Ethereum games accounted for 16% while Ethereum games enjoyed 25% as Ethereum-based marketplaces had a 54% share of the trading value.

This displays Ethereum’s dominance as the generator of financial wealth which integrated with its major NFT standard to ensure that value flowed from the token-oriented DeFi dApps into other asset classes.

Blockchain gaming

EOS and Tron now have their local NFT standards. But, they are not quite mature or adequately supported compared to Ethereum’s ERC1155 and ERC721 standards.

WAX blockchain was the only platform that managed to successfully leverage the power of NFTs. It generated almost $6 million of trading but most of the money was from collectibles projects rather than blockchain games.

What Happens Next?

It can be concluded that 2020 was the year when the foundations of blockchain gaming were reinforced. In that context, over $70 million was invested into the firms that operate in this industry. Among them was Dapper Labs that got $11 million to help it launch and populate a new Flow blockchain that eventually raised $68 million. Also, the Sorare fantasy soccer game got $8 million of these investments.

The Sandbox and Axie Infinity also raised $4 million via private and public sales of their games’ tokens. F1 Delta Time and The Sandbox generated around $2million each through direct sales of their game NFTs to users.

Concurrently, peer-to-peer trading thrived within Axie Infinity. It recorded many NFT sales of over $100,000 as the value of its most rare Mystic Axies soared significantly.

Many projects launched their beta programs including Skyweaver, Nine Chronicles, The Sandbox, Soccer Manager Elite, and Blankos Block Party as they get ready for more formal launches in 2021.

Additionally, there has been a widespread migration of Ethereum-based projects including MegaCryptoPolis, Neon District, and Spells of Genesis to use Matic Network. That network is a layer two technology that supports faster and cheap transactions.

It means that the future of blockchain gaming is not yet here but it is steadily approaching.

Source: https://e-cryptonews.com/blockchain-gaming-thrived-in-2020-what-does-the-future-hold/

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Mike Novogratz: Mark Cuban Shouldn’t Accept Doge

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How to Earn on Crypto you’re Hodling in 2021

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Everyone in the world likes money and even better if you can earn with the money you already have. There has been a sharp rise in crypto price points in recent months so if you’re one of the many die-hard holders out there you are probably wondering how you can get a return from the holdings you already have. Thankfully as the industry has evolved so has the ability for investors to earn on their holdings of crypto assets. This article will talk about some of the ways you can try to make a return on investment for everything you currently have in your portfolio. Some of the earning ways are conventional and others require a little bit of work or substantial knowledge. Nevertheless here are some ways you can earn on your crypto portfolio. 

Staking is the process of actively holding a small to substantial amount of funds in a designated blockchain wallet in order to support a proof of stake (PoS) blockchain protocol. Essentially the investor locks funds into a particular wallet to support the staking process of the blockchain which they are staking on. As with anything in life an individual only does something if they feel they will gain benefit from it so when it comes to staking a stakeholder in the proof of stake blockchain will only lock in their stake if they are going to receive a reward. Many blockchain platforms out there offer proof of stake rewards to those staking crypto in locked wallets and you can earn a staking reward from doing so. When staking you often do not only earn an income from locking in funds but the staking also offers the holder the ability to vote on the blockchains protocol updates. Think of it similar to having voting rights from holding stock in a public company, you will have the right to a proportional vote to your stake on the future of the blockchain protocol. It’s relatively easy to find a company that allows you to stake your crypto and even the big guys like Coinbase offer staking features on their platform.

Peer to peer lending has become an increasingly popular topic in the modern fintech sector these days and the normal financial channels often translate over into the cryptocurrency world. Like with conventional peer to peer lending the way you earn money from the transaction is through interest on the lending of assets. Unlike conventional peer to peer products, the cryptocurrency world offers substantially higher interest returns than its fiat (government issued currency) counterpart. This is not always the case however, but as a general rule of thumb you are set to earn more with a crypto-based lending house.

One trusted example of a medium for lending is Nexo. Nexo offers credit lines to a borrower that are secured against crypto collateral. This collateralized method does away with the need for traditional credit checks since the crypto acts as the bridge of trust if and when the borrower is unable to pay. So you are always safe as a lender in that regard. Nexo clients who deposit funds in fiat or stablecoins can expect to earn returns of up to 12%, whereas clients who directly deposit crypto can earn interest of up to 10% of their holdings. Lenders who hold a minimum percentage of their portfolio in NEXO tokens, and choose to receive payouts in their token are eligible to receive higher returns than those who do not. 

If you are interested in mining for more crypto, another option is to hold shares in an active cryptocurrency mine. Mining is the backbone of the entire cryptocurrency ecosystem. So by investing into a mine you are not only using your crypto to make more crypto, but you are also supporting the entire blockchain community through mining activities. 

Advertisement &  & 

Miners solve complex mathematical equations using graphics processors. Once the mathematical equation is solved, the block is validated and a reward is sent to the miner. Pylon Finance is said to have the largest active ETH mine in North America with return rates for investors of up to 250% per year. 

The easiest way of all to earn money from your crypto may be to deposit your funds into a platform that offers you an annual percentage yield (APY) on the money you hold on their platform. This is similar to depositing money into a savings account at a bank that gives you an annual percentage return on what you hold in your bank account. You can check out the different DeFi depositing options on DeFi Pulse and start earning on your holdings immediately. 

What is important to consider however is that depositing can only be done with crypto assets and altcoins and not fiat currency so this is only a valuable way to earn returns if you are insisting on earning on just your crypto holdings. 

In a similar fashion to earning from DeFi, many crypto exchanges offer earnings programs. These again are similar to depositing into bank accounts and earning interest with the key difference being that the interest earned is usually substantially higher than one would earn from a conventional bank account. That coupled with compounding interest and the gains in the crypto market in recent months makes this option very attractive. Companies such as Crypto.com offer interest on the major cryptocurrencies up to 8% and pay out interest on a weekly basis. Along with being paid weekly you also have your interest accrued daily so you know whatever you are holding is always earning you money, even if your portfolio fluctuates. 

Although it isn’t conventionally set to make you money, you can look to the slot machines and roulette table for extra returns. If you’re a rainman at blackjack, Fortunejack is the oldest Bitcoin casino in the world – so why not try to make some tasty returns there?


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DISCLAIMER Read More

The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.

Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Check out Nord
Make your Money Grow with Mintos
Source: https://zycrypto.com/how-to-earn-on-crypto-youre-hodling-in-2021/

Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Source: https://coingenius.news/mike-novogratz-mark-cuban-shouldnt-accept-doge/?utm_source=rss&utm_medium=rss&utm_campaign=mike-novogratz-mark-cuban-shouldnt-accept-doge

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Mark Cuban sees $1 written in DOGE’s tea leaves

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How to Earn on Crypto you’re Hodling in 2021

Advertisement &  & 

Everyone in the world likes money and even better if you can earn with the money you already have. There has been a sharp rise in crypto price points in recent months so if you’re one of the many die-hard holders out there you are probably wondering how you can get a return from the holdings you already have. Thankfully as the industry has evolved so has the ability for investors to earn on their holdings of crypto assets. This article will talk about some of the ways you can try to make a return on investment for everything you currently have in your portfolio. Some of the earning ways are conventional and others require a little bit of work or substantial knowledge. Nevertheless here are some ways you can earn on your crypto portfolio. 

Staking is the process of actively holding a small to substantial amount of funds in a designated blockchain wallet in order to support a proof of stake (PoS) blockchain protocol. Essentially the investor locks funds into a particular wallet to support the staking process of the blockchain which they are staking on. As with anything in life an individual only does something if they feel they will gain benefit from it so when it comes to staking a stakeholder in the proof of stake blockchain will only lock in their stake if they are going to receive a reward. Many blockchain platforms out there offer proof of stake rewards to those staking crypto in locked wallets and you can earn a staking reward from doing so. When staking you often do not only earn an income from locking in funds but the staking also offers the holder the ability to vote on the blockchains protocol updates. Think of it similar to having voting rights from holding stock in a public company, you will have the right to a proportional vote to your stake on the future of the blockchain protocol. It’s relatively easy to find a company that allows you to stake your crypto and even the big guys like Coinbase offer staking features on their platform.

Peer to peer lending has become an increasingly popular topic in the modern fintech sector these days and the normal financial channels often translate over into the cryptocurrency world. Like with conventional peer to peer lending the way you earn money from the transaction is through interest on the lending of assets. Unlike conventional peer to peer products, the cryptocurrency world offers substantially higher interest returns than its fiat (government issued currency) counterpart. This is not always the case however, but as a general rule of thumb you are set to earn more with a crypto-based lending house.

One trusted example of a medium for lending is Nexo. Nexo offers credit lines to a borrower that are secured against crypto collateral. This collateralized method does away with the need for traditional credit checks since the crypto acts as the bridge of trust if and when the borrower is unable to pay. So you are always safe as a lender in that regard. Nexo clients who deposit funds in fiat or stablecoins can expect to earn returns of up to 12%, whereas clients who directly deposit crypto can earn interest of up to 10% of their holdings. Lenders who hold a minimum percentage of their portfolio in NEXO tokens, and choose to receive payouts in their token are eligible to receive higher returns than those who do not. 

If you are interested in mining for more crypto, another option is to hold shares in an active cryptocurrency mine. Mining is the backbone of the entire cryptocurrency ecosystem. So by investing into a mine you are not only using your crypto to make more crypto, but you are also supporting the entire blockchain community through mining activities. 

Advertisement &  & 

Miners solve complex mathematical equations using graphics processors. Once the mathematical equation is solved, the block is validated and a reward is sent to the miner. Pylon Finance is said to have the largest active ETH mine in North America with return rates for investors of up to 250% per year. 

The easiest way of all to earn money from your crypto may be to deposit your funds into a platform that offers you an annual percentage yield (APY) on the money you hold on their platform. This is similar to depositing money into a savings account at a bank that gives you an annual percentage return on what you hold in your bank account. You can check out the different DeFi depositing options on DeFi Pulse and start earning on your holdings immediately. 

What is important to consider however is that depositing can only be done with crypto assets and altcoins and not fiat currency so this is only a valuable way to earn returns if you are insisting on earning on just your crypto holdings. 

In a similar fashion to earning from DeFi, many crypto exchanges offer earnings programs. These again are similar to depositing into bank accounts and earning interest with the key difference being that the interest earned is usually substantially higher than one would earn from a conventional bank account. That coupled with compounding interest and the gains in the crypto market in recent months makes this option very attractive. Companies such as Crypto.com offer interest on the major cryptocurrencies up to 8% and pay out interest on a weekly basis. Along with being paid weekly you also have your interest accrued daily so you know whatever you are holding is always earning you money, even if your portfolio fluctuates. 

Although it isn’t conventionally set to make you money, you can look to the slot machines and roulette table for extra returns. If you’re a rainman at blackjack, Fortunejack is the oldest Bitcoin casino in the world – so why not try to make some tasty returns there?


Get Daily Crypto News On Facebook | Twitter | Telegram | Instagram


DISCLAIMER Read More

The views expressed in the article are wholly those of the author and do not represent those of, nor should they be attributed to, ZyCrypto. This article is not meant to give financial advice. Please carry out your own research before investing in any of the various cryptocurrencies available.

Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Check out Nord
Make your Money Grow with Mintos
Source: https://zycrypto.com/how-to-earn-on-crypto-youre-hodling-in-2021/

Checkout PrimeXBT
Trade with the Official CFD Partners of AC Milan
The Easiest Way to Way To Trade Crypto.
Source: https://coingenius.news/mark-cuban-sees-1-written-in-doges-tea-leaves/?utm_source=rss&utm_medium=rss&utm_campaign=mark-cuban-sees-1-written-in-doges-tea-leaves

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Aave is a decentralized, open-source, non-custodial liquidity protocol that enables users to earn interest on cryptocurrency deposits, as well as borrow assets through smart contracts.

Aave is interesting (pardon the pun) because interest compounds immediately, rather than monthly or yearly. Returns are reflected by an increase in the number of AAVE tokens held by the lending party. 

Apart from helping to generate earnings, the protocol also offers flash loans. These are trustless, uncollateralized loans where borrowing and repayment occur in the same transaction. 

Assets on Aave as of 3/7/21 (source: aave homepage)

Assets on Aave as of 3/7/21 (source: aave homepage)

The following article explores Aave’s history, services, tokenomics, security, how the protocol works, and what users should be wary of when using the Aave platform.

How Does Aave Work?

The Aave protocol mints ERC-20 compliant tokens in a 1:1 ratio to the assets supplied by lenders. These tokens are known as aTokens and are interest-bearing in nature. These tokens are minted upon deposit and burned when redeemed. 

These aTokens, such as aDai, are pegged at a ratio of 1:1 to the value of the underlying asset – that is Dai in the case of aDai. 

The lending-borrowing mechanism of the Aave lending pool dictates that lenders will send their tokens to an Ethereum blockchain smart contract in exchange for these aTokens — assets that can be redeemed for the deposited token plus interest.  

atokens on Aave

atokens on Aave

Borrowers withdraw funds from the Aave liquidity pool by depositing the required collateral and, also, receive interest-bearing aTokens to represent the equivalent amount of the underlying asset.

Each liquidity pool, the liquidity market in the protocol where lenders deposit and borrowers withdraw from, has a predetermined loan-to-value ratio that determines how much the borrower can withdraw relative to their collateral. If the borrower’s position goes below the threshold LTV level, they face the risk of liquidation of their assets.

Humble Beginnings as ETHLend 

Aave was founded in May 2017 by Stani Kulechov as a decentralized peer-to-peer lending platform under the name ETHLend to create a transparent and open infrastructure for decentralized finance. ETHLend raised 16.5 million US dollars in its Initial Coin Offering (ICO) on November 25, 2017.

Kulechov, currently serving also as the CEO of Aave, has successfully led the company into the list of top 50 blockchain projects published by PWC. Aave is headquartered in London and backed by credible investors, such as Three Arrows Capital, Framework Ventures, ParaFi Capital, and DTC Capital.

ETHLend widened its bouquet of offerings and rebranded to Aave by September 2018. The Aave protocol was formally launched in January 2020, switching to the liquidity pool model from a Microstaking model.

To add context to this evolution from a Microstaking model to a Liquidity Pool model, Microstaking was where everyone using the ETHLend platform. Whether one is applying for a loan, funding a loan, or creating a loan offer, they had to purchase a ticket to obtain the rights to use the application, and that ticket had to be paid in the platform’s native token LEND. The ticket was previously a small amount pegged to USD, and the total number of LEND needed varied based on the token’s value. 

In the liquidity pool model, Lenders deposit funds to liquidity pools. Thus creating what’s known as a liquidity market, and borrowers can withdraw funds from the liquidity pools by providing collateral. In case the borrowers become undercollateralized, they face liquidation.

Aave raised another 4.5 million US dollars from an ICO and  3 million US dollars from Framework Ventures on July 8th and July 15th, 2020. 

Aave Pronunciation

Aave is typically pronounced “ah-veh.” 

Aave’s Products and Services

The Aave protocol is designed to help people lend and borrow cryptocurrency assets. Operating under a liquidity pool model, Aave allows lenders to deposit their digital assets into liquidity pools to a smart contract on the Ethereum blockchain. In exchange, they receive aTokens — assets that can be redeemed for the deposited token plus interest.

Aave's functionality

Borrowers can take out a loan by putting their cryptocurrency as collateral. The liquidity protocol of Aave, as per the latest available numbers, is more than 4.73 billion US dollars strong. 

Flash Loans

Aave’s Flash loans are a type of uncollateralized loan option, which is a unique feature even for the DeFi space. The Flash Loan product is primarily utilized by speculators seeking to take advantage of quick arbitrage opportunities. 

Borrowers can instantly borrow cryptocurrency for a matter of seconds; they must return the borrowed amount to the pool within one transaction block. If they fail to return the borrowed amount within the same transaction block, the entire transaction reverses and undo all actions executed until that point. 

Flash loans encourage a wide range of investment strategies that typically aren’t possible in such a short window of time. If used properly, a user could profit through arbitrage, collateral swapping, or self-liquidation.

Rate Switching

Aave allows borrowers to switch between fixed and floating rates, which is a fairly unique feature in DeFi. Interest rates in any DeFi lending and borrowing protocol are usually volatile, and this feature offers an alternative by providing an avenue of fixed stability. 

For example, if you’re borrowing money on Aave and expect interest rates to rise, you can switch your loan to a fixed rate to lock in your borrowing costs for the future. In contrast, if you expect rates to decrease, you can go back to floating to reduce your borrowing costs.

Aave Bug Bounty Campaign

Aave offers a bug bounty for cryptocurrency-savvy users. By submitting a bug to the Aave protocol, you can earn a reward of up to $250,000.

Aave Tokenomics

The maximum supply of the AAVE token is 16 million, and the current circulating supply is a little above 12.4 million AAVE tokens.

Initially, AAVE had 1.3 billion tokens in circulation. But in a July 2020 token swap, the protocol swapped the existing tokens for newly minted AAVE coins at a 1:100 ratio, resulting in the current 16 million supply. Three million of these tokens were kept in reserve allocated to the development fund for the core team. 

Aave’s price has been fairly volatile, with an all-time high of $559.12 on February 10, 2021. The lowest price was $25.97 on November 5th, 2020. 

Aave Security

Aave stores funds on a non-custodial smart contract on the Ethereum blockchain. As a non-custodial project, users maintain full control of their wallets. 

Aave governance token holders can stake their tokens in the safety module, which acts as a sort of decentralized insurance fund designed to ensure the protocol against any shortfall events such as contract exploits. In the module, the stakers can risk up to 30% of the funds they lock in the module and earn a fixed yield of 4.66%. 

The safety module has garnered $375 million in deposits, which is arguably the largest decentralized insurance fund of its kind. 

Final Thoughts: Why is Aave Important?

Aave is a DeFi protocol built on strong fundamentals and has forced other competitors in the DeFi space to bolster their value propositions to stay competitive. Features such as Flash loans and Rate switching offer a distinct utility to many of its users.

Aave emerged as one of the fastest-growing projects in the Summer 2020 DeFi craze. At the beginning of July 2020, the total value locked in the protocol was just above $115 million US dollars. In less than a year, on February 13, 2021, the protocol crossed the mark of 6 billion US dollars. The project currently allows borrowing and lending in 20 cryptocurrencies.

Aave is important because it shows how ripe the DeFi space is for disruption with new innovative features and how much room there is to grow.

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Source: https://coincentral.com/what-is-aave/

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Trade with the Official CFD Partners of AC Milan
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Chinese Crypto Purchases Signal Asian Corporate Attention

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Aave is a decentralized, open-source, non-custodial liquidity protocol that enables users to earn interest on cryptocurrency deposits, as well as borrow assets through smart contracts.

Aave is interesting (pardon the pun) because interest compounds immediately, rather than monthly or yearly. Returns are reflected by an increase in the number of AAVE tokens held by the lending party. 

Apart from helping to generate earnings, the protocol also offers flash loans. These are trustless, uncollateralized loans where borrowing and repayment occur in the same transaction. 

Assets on Aave as of 3/7/21 (source: aave homepage)

Assets on Aave as of 3/7/21 (source: aave homepage)

The following article explores Aave’s history, services, tokenomics, security, how the protocol works, and what users should be wary of when using the Aave platform.

How Does Aave Work?

The Aave protocol mints ERC-20 compliant tokens in a 1:1 ratio to the assets supplied by lenders. These tokens are known as aTokens and are interest-bearing in nature. These tokens are minted upon deposit and burned when redeemed. 

These aTokens, such as aDai, are pegged at a ratio of 1:1 to the value of the underlying asset – that is Dai in the case of aDai. 

The lending-borrowing mechanism of the Aave lending pool dictates that lenders will send their tokens to an Ethereum blockchain smart contract in exchange for these aTokens — assets that can be redeemed for the deposited token plus interest.  

atokens on Aave

atokens on Aave

Borrowers withdraw funds from the Aave liquidity pool by depositing the required collateral and, also, receive interest-bearing aTokens to represent the equivalent amount of the underlying asset.

Each liquidity pool, the liquidity market in the protocol where lenders deposit and borrowers withdraw from, has a predetermined loan-to-value ratio that determines how much the borrower can withdraw relative to their collateral. If the borrower’s position goes below the threshold LTV level, they face the risk of liquidation of their assets.

Humble Beginnings as ETHLend 

Aave was founded in May 2017 by Stani Kulechov as a decentralized peer-to-peer lending platform under the name ETHLend to create a transparent and open infrastructure for decentralized finance. ETHLend raised 16.5 million US dollars in its Initial Coin Offering (ICO) on November 25, 2017.

Kulechov, currently serving also as the CEO of Aave, has successfully led the company into the list of top 50 blockchain projects published by PWC. Aave is headquartered in London and backed by credible investors, such as Three Arrows Capital, Framework Ventures, ParaFi Capital, and DTC Capital.

ETHLend widened its bouquet of offerings and rebranded to Aave by September 2018. The Aave protocol was formally launched in January 2020, switching to the liquidity pool model from a Microstaking model.

To add context to this evolution from a Microstaking model to a Liquidity Pool model, Microstaking was where everyone using the ETHLend platform. Whether one is applying for a loan, funding a loan, or creating a loan offer, they had to purchase a ticket to obtain the rights to use the application, and that ticket had to be paid in the platform’s native token LEND. The ticket was previously a small amount pegged to USD, and the total number of LEND needed varied based on the token’s value. 

In the liquidity pool model, Lenders deposit funds to liquidity pools. Thus creating what’s known as a liquidity market, and borrowers can withdraw funds from the liquidity pools by providing collateral. In case the borrowers become undercollateralized, they face liquidation.

Aave raised another 4.5 million US dollars from an ICO and  3 million US dollars from Framework Ventures on July 8th and July 15th, 2020. 

Aave Pronunciation

Aave is typically pronounced “ah-veh.” 

Aave’s Products and Services

The Aave protocol is designed to help people lend and borrow cryptocurrency assets. Operating under a liquidity pool model, Aave allows lenders to deposit their digital assets into liquidity pools to a smart contract on the Ethereum blockchain. In exchange, they receive aTokens — assets that can be redeemed for the deposited token plus interest.

Aave's functionality

Borrowers can take out a loan by putting their cryptocurrency as collateral. The liquidity protocol of Aave, as per the latest available numbers, is more than 4.73 billion US dollars strong. 

Flash Loans

Aave’s Flash loans are a type of uncollateralized loan option, which is a unique feature even for the DeFi space. The Flash Loan product is primarily utilized by speculators seeking to take advantage of quick arbitrage opportunities. 

Borrowers can instantly borrow cryptocurrency for a matter of seconds; they must return the borrowed amount to the pool within one transaction block. If they fail to return the borrowed amount within the same transaction block, the entire transaction reverses and undo all actions executed until that point. 

Flash loans encourage a wide range of investment strategies that typically aren’t possible in such a short window of time. If used properly, a user could profit through arbitrage, collateral swapping, or self-liquidation.

Rate Switching

Aave allows borrowers to switch between fixed and floating rates, which is a fairly unique feature in DeFi. Interest rates in any DeFi lending and borrowing protocol are usually volatile, and this feature offers an alternative by providing an avenue of fixed stability. 

For example, if you’re borrowing money on Aave and expect interest rates to rise, you can switch your loan to a fixed rate to lock in your borrowing costs for the future. In contrast, if you expect rates to decrease, you can go back to floating to reduce your borrowing costs.

Aave Bug Bounty Campaign

Aave offers a bug bounty for cryptocurrency-savvy users. By submitting a bug to the Aave protocol, you can earn a reward of up to $250,000.

Aave Tokenomics

The maximum supply of the AAVE token is 16 million, and the current circulating supply is a little above 12.4 million AAVE tokens.

Initially, AAVE had 1.3 billion tokens in circulation. But in a July 2020 token swap, the protocol swapped the existing tokens for newly minted AAVE coins at a 1:100 ratio, resulting in the current 16 million supply. Three million of these tokens were kept in reserve allocated to the development fund for the core team. 

Aave’s price has been fairly volatile, with an all-time high of $559.12 on February 10, 2021. The lowest price was $25.97 on November 5th, 2020. 

Aave Security

Aave stores funds on a non-custodial smart contract on the Ethereum blockchain. As a non-custodial project, users maintain full control of their wallets. 

Aave governance token holders can stake their tokens in the safety module, which acts as a sort of decentralized insurance fund designed to ensure the protocol against any shortfall events such as contract exploits. In the module, the stakers can risk up to 30% of the funds they lock in the module and earn a fixed yield of 4.66%. 

The safety module has garnered $375 million in deposits, which is arguably the largest decentralized insurance fund of its kind. 

Final Thoughts: Why is Aave Important?

Aave is a DeFi protocol built on strong fundamentals and has forced other competitors in the DeFi space to bolster their value propositions to stay competitive. Features such as Flash loans and Rate switching offer a distinct utility to many of its users.

Aave emerged as one of the fastest-growing projects in the Summer 2020 DeFi craze. At the beginning of July 2020, the total value locked in the protocol was just above $115 million US dollars. In less than a year, on February 13, 2021, the protocol crossed the mark of 6 billion US dollars. The project currently allows borrowing and lending in 20 cryptocurrencies.

Aave is important because it shows how ripe the DeFi space is for disruption with new innovative features and how much room there is to grow.

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Source: https://coincentral.com/what-is-aave/

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