Introducing AAVE: The World’s Leading DeFi Protocol (Project Analysis)
🤔What is AAVE?
Aave (formerly known as ETHLend) is an open-source and non-custodial liquidity protocol for earning interest on deposits and borrowing assets.
Launched in 2017 by Stani Kulechov, the protocol is built on top of the Ethereum network but is also interoperable with Polygon and Avalanche.
The TVL (Total Value Locked, the main index to define the degree of adoption of a protocol) of the project’s smart contracts exceeds $20B, making AAVE the largest DeFi protocol in terms of locked liquidity.
🗳️A utility token: $AAVE
Governance
The protocol itself uses a DAO (Decentralized Autonomous Organization); which means the project is led and governed by $AAVE token holders.
Staking
$AAVE tokens can also be staked in the “Safety Module”, a mechanism that acts as an insurance system in case of a Shortfall Event (event causing a state of deficit for the liquidity providers) within the money markets that belong to the Aave ecosystem.
Although the use cases for $AAVE are currently limited, its community is very active and new use cases may emerge in the coming years.
🔥Why could the V3 of the protocol be a game-changer for the DeFi ecosystem?
AAVE V3 contains various additions/changes which greatly improve the protocol compared to its V2:
Portal🌀
Allows assets to seamlessly flow between Aave V3 markets over different networks
High-Efficiency Mode🔝
Allows borrowers to extract the highest borrowing power out of their collateral
Isolation Mode🔗
Limits exposure and risks to the protocol from newly listed assets by only permitting borrowing up to a specific debt ceiling
Risk Management Improvements🔐
Provides additional protection for the protocol through various risk caps and other tools
L2-Specific Features🛣️
Designs specific to Layer 2 networks to improve user experience and reliability
Community Contribution🕺
Facilitates and incentivizes community usage through a modular, well-organized codebase
All these exciting new features will definitely make AAVE one of the most resilient and secure DeFI protocols on the market! 💪
🗺️2022 Roadmap
In addition to the imminent launch of its V3 on various mainnets, AAVE also plans to launch a mobile app as well as a social network framework named Lens.
Even if the details and launch dates of these two new products are still unclear, there is no doubt that they will only strengthen AAVE’s dominance, making its lending ecosystem stronger than ever.
🚀$AAVE Price Prediction
With an ATH of $661.69 reached on May 18th, 2021, $AAVE is down to $170 at the time of writing, which is equivalent to a drop of almost 75%.
However, the safety and potential of the project remain unchanged; the fundamentals of AAVE are strong and it could well be one of the catalysts of the next bull run.
With a Total Value Locked of over $20B, AAVE’s market cap may be undervalued by a factor of 5.
For a deeper analysis, you can take a look at this video from CoinBureau (an amazing crypto-focused YouTube channel, we highly recommend it) about AAVE.
Be careful with your hard-earned money. Always consider DYOR (Doing Your Own Research) before investing in a project.
🚨Disclaimer
The analysis above is not intended as financial advice.
This article has been written to be understandable to everyone, including ecosystem beginners; Thus, many shortcuts have been taken to keep its length to a minimum.
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