Aave (AAVE) is one of the most well-known lending protocols in the decentralized finance (DeFi) space, and its native token. What is Aave? Aave is an open-source, non-custodial liquidity protocol that allows users to lend or borrow cryptocurrencies through smart contracts without intermediaries (such as banks).
It was launched in 2017 under the name ETHLend, founded by Finnish developer Stani Kulechov, and was renamed Aave at the end of 2018, transitioning to a liquidity pool model.
Currently, Aave V3 is the mainstream version, supporting multiple chains including Ethereum, Polygon, Avalanche, Arbitrum, Optimism, etc. Aave's core functions
Deposits (providing liquidity): Users deposit cryptocurrencies into liquidity pools to earn interest (aToken represents the deposit share, automatically accruing interest).
Borrowing: Requires over-collateralization, with loan amounts typically below 75-80% of the collateral value (depending on the asset), with options for variable or fixed interest rates.
Flash Loans: Aave's signature innovation, allowing loans without collateral, but must be repaid within the same transaction (often used for arbitrage).
Liquidation Mechanism: If the collateral value decreases, it will be liquidated when the health factor < 1, protecting lenders.
Governance: AAVE holders can participate in proposals and voting, deciding on protocol upgrades, adding new assets, etc.
The role of the AAVE token
Governance: Holding AAVE allows participation in Aave DAO's decision-making.
Staking: Staking AAVE earns protocol fee shares and enhances the Safety Module's security.
Fee Discount: Using AAVE as collateral for loans can enjoy lower fees.
Current market data (around December 22, 2025)
Price: Approximately $150–$180 USD (recently fluctuated greatly, dropped due to governance disputes).
Market Cap: Approximately $2.3B–$2.8B, ranked among the top 50 cryptocurrencies.
Circulation: About 15 million tokens (total supply 16 million tokens).
Risk Warning: Aave is a leader in DeFi, but there are still risks of smart contracts, liquidation risks (during significant price fluctuations), and governance disputes.
