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AAVE Review, Pros & Cons and Features

AAVE is a cryptocurrency platform that offers savings accounts and loans. AAVE offers savings rates as high as 20.8176% APY on deposits, with no hidden fees and instant access to your funds. Instant loans can also be secured against your deposits at rates as low as 0.00167% APY, with no credit checks required. One unique feature of AAVE is that deposited funds that are used as collateral can also simultaneously continue to earn interest.

The AAVE protocol was created in 2017 by a Finnish law student Stani Kulechov. The platform was originally known as ETHLend before being rebranded to AAVE. AAVE has secured investment funding of $49M USD to grow the platform. This comprises $24M USD from ICOs (Initial Coin Offerings), and $25M USD from a venture capital round where Blockchain Capital, Standard Crypto, and Blockchain.com were the leading investors.

AAVE is a decentralized finance (DeFi) protocol where people can earn interest on deposits and borrow assets. AAVE is running on an open source and non-custodial liquidity protocol. Unlike traditional lending marketplaces that look to match borrowers directly to lenders, a liquidity protocol works by placing all the lenders' deposits into a liquidity pool. An algorithm then calculates the rate at which borrowers can borrow from that pool and the savings rate payable to the lenders.

The platform is completely decentralized so it is operated and governed by the users of the platform according to how many AAVE tokens they hold. By being decentralized, the platform doesn’t follow any KYC (Know your customer) rules. Anyone can join the platform, deposit funds, earn interest, borrow, and swap crypto assets. AAVE is built on the Ethereum network and is one of the biggest crypto liquidity providers out there with approximately $10Bn USD of funds on the network.

You can earn interest on your funds by using them to provide liquidity to the network. You can also take out a loan secured against your funds as collateral. Your funds will continue to accrue savings interest even when also used as collateral on a loan.

The AAVE Platform has its own native currency which is also called AAVE. The AAVE token is primarily used for governance so by owning some AAVE tokens you can vote on new proposals for the platform.

The AAVE platform is available wherever you are connected to the internet. It is not regulated because it is a completely decentralised platform.

Pros

Very low loan rates available

No origination or early redemption fees

Interest accrued every second

Savings interest payments remain attached to coin even if transferred off platform

Fully open source platform

One of the largest crypto loan platforms

Cons

Interface is a bit complex and confusing for amateur users

Transaction (gas) fees on the Ethereum network can be high, but AAVE does support a number of much cheaper Ethereum sidechains including Polygon and Avalanche

DeFinda Score™

AAVE Reviews

It's actually quite difficult to find user reviews of AAVE across the web. This is in part due to its decentralised nature. It's like trying to find user reviews of bitcoin.

Nonetheless we did find some user reviews and a number of expert reviews for AAVE.

Overall AAVE is considered one of the more trustworthy decentralised platforms. People like its transparency and open-source nature meaning that anyone can review and verify the underlying code for AAVE. Being so transparently open helps to build trust.

The experts rate the highly competitive loan rates offered by AAVE and its wide support for various Ethereum side chains which helps to reduce transaction fees. However, the savings rates are generally speaking considered less competitive.

The main downside reported for AAVE is that it has no mobile app and the web app is not very user-friendly. It can be a confusing protocol if you are not familiar with how it works and is not a good choice for crypto novices. People also raise concerns over the flash loans product offered by AAVE as these are very high-value, ultra short-term unsecured loans. There is definitely increased financial risk with this type of innovative product.

Finally, AAVE does not offer any exchange services, so you'll have to use a different platform if you want to exchange tokens.

How to Get Started With AAVE

You can access platform via the AAVE web app. AAVE doesn’t have a mobile app. To get started you will need to connect an existing crypto wallet such as metamask to the AAVE app. Once your wallet is connected you can then access your funds from within the AAVE web platform.

There is not sign up process for AAVE because the platform is completely decentralised. You do not need to provide any personal details. Just connect your wallet on AAVE web app and you are ready to use the protocol.

AAVE Savings Accounts

Savings rates of up to 20.8176% APY are available on AAVE. The rates vary by cryptocurrency and also by network.

To open a savings account you simply go to the AAVE web app, connect your wallet and your available funds should appear on the web app screen. There is no KYC process to complete. Then click "Supply" next to the funds that you want to start earning money on. It is called "supply" because you are supplying funds to the liquidity pool for that token.

When you supply funds to the liquidity pool they are converted to an AAVE equivalent token. So if you deposit Dai it is converted to aDai when you add it to the liquidity pool. It will then accrue interest in the same currency, aDai. The same is true for ETH which will be converted to AWETH when you add it to the liquidity pool. Each of these AAVE tokens are pegged 1:1 to the original asset. When you withdraw funds from the pool then your tokens will be converted back into their original format, e.g. Dai. Interestingly these tokenised savings assets such as aDai can be handled just like any other token. They can be withdrawn from the AAVE platform or traded on a marketplace.

The process of transferring funds between the main Ethereum network and the AAVE equivalents does attract transaction fees. These fees can be quite high on the main Ethereum network, but are much lower on the supported Ethereum sidechains such as Polygon.

Once you have committed your funds you will start accruing interest every second. There is no long-term commitment and you can withdraw your funds at any time. The interest rate that you earn will continuously vary according to the protocol algorithm. The higher the demand from borrowers for your token the higher the interest rate will be.

Savings accounts are only available on cryptocurrencies on AAVE. You can't earn interest directly on fiat currencies on AAVE.

You can calculate your potential earnings on AAVE using our AAVE interest rate calculator.

The table below summarises AAVE's interest rates by currency type:

AAVE Loans

AAVE offers highly competitive loans rates starting at just 0.00167% APY.

The nature of AAVE's decentralised lending pool model means that the borrow rates are constantly changing depending on the amount of demand for loans and the amount of currency being deposited in the liquidity pool by savers.

For each token there are two different rates offered. A variable rate, which as the name suggests is continuously varying according to the liquidity pool algorithm, and a fixed rate which will remain the same for the duration of the loan. The fixed-rate loans are typically more expensive than the variable-rate loans. Variable rates can sometimes change very quickly if there is high demand. This means that fixed rate loans can sometimes be useful even if the rate is much higher than the variable rate.

To take out a loan you first need to go to the AAVE web app and connect your Ethereum wallet. Note that there is no KYC process as the protocol is fully decentralised. Within the app you will see a list of available assets to borrow and their current variable and stable (fixed) rates. You can also switch to one of the Ethereum sidechains such as Polygon to see rates available for tokens on that network.

To be eligible for a loan you must commit some of your existing crypto funds as collateral. The amount of collateral must exceed the size of your loan and depends on the current loan to value ratios on each of the tokens. AAVE loan to value ratios vary from anywhere between 0.4% and 85.5%.

Once AAVE has connection to your Etheruem wallet it will automatically consider all of your current eligible crypto assets as being available as potential collateral. This will then allow the platform to show you your maximum loan size for each of the available loan currencies. To create the loan you simply click "borrow" next to the currency you would like to receive, enter the loan size and whether you want a fixed or variable rate loan. One interesting feature of AAVE is that your tokens can earn savings interest whilst simultaneously being used as collateral.

The setup of each loan does attract transaction fees and these can be quite high on the Ethereum network. Lower fees are available on the supported Ethereum sidechains.AAVE manages loans with a "health factor" assigned to each loan. If the health factor drops too low then you will need to either deposit more collateral or repay part of the loan. If you do neither and the health factor continues to drop then your loan will automatically be liquidated. You will also be charged a liquidation penalty which is a percentage of loan value that will also be deducted from your account.

AAVE offers a unique ultra short term loan product for developers only called Flash Loans. This innovative product allows an algorithmic trader to borrow crypto funds for a very short period of time without providing any collateral. The reason they can offer a loan with no collateral is they aim to eliminate any risk that the loan will not repaid. This is done by building the entire loan lifecycle (the loan being issued, the loan money being used, and the loan being repaid) into a single smart contract transaction. If the transaction fails for any reason then it simply does not go through and it is as if the loan was never even issued. The main use for flash loans is in arbitrage, which means taking advantage of price differences in different marketplaces. Flash Loans are controversial though as they can be used to adversely manipulate a marketplace. In April 2022 hackers used a massive AAVE flash loan to manipulate the governance token of a stablecoin protocol known as Beanstalk Farms. In doing so they managed to syphon off $80m from Beanstalk Farms and create total losses for that network of around $182m. It is important to note that AAVE was not hacked or compromised during this attack, but its Flash Loan product was exploited for a nefarious purpose.

There is no pre-set maximum or minimum for loans. The amount that can be borrowed depends on your deposit size and the available liquidity. You can repay the loan at any time without any restrictions. Repayments have to be done in the same asset as borrowed. You can also repay your loan using collateral in the new version 2.

There is no term or fixed payments on the loans. As long as your health status on the platform is good, you won’t be asked to make any payment or get liquidated. As long as you hold the borrowed assets, you will have a growing accrued interest which will affect your health status on the platform.

Supported Currencies

AAVE supports over 30 currencies including Ethereum, Tether, USD Coin and Binance USD.

AAVE wallets don’t accept fiat currencies, users should convert their fiat currencies to crypto before transferring them to AAVE.

AAVE also supports multiple Ethereum sidechains including Polygon, Avalanche, Arbitrum, Fantom, Harmony and Optimism. Each of these sidechains have their own unique features, but one key benefit of them all is significantly lower transaction fees.

AAVE Arc

AAVE has launched a permissioned version of its liquidity pool targeted at financial institutions that need to comply with KYC and AML regulations.

It works in the same way as regular AAVE, but in a separate liquidity pool specifically for each financial institution. Access to each of these pools is on a permission only basis. To access the pool you will need to provide identity information and complete the usual KYC and AML checks.

AAVE is one of the largest crypto savings and loans platforms and AAVE ARC aims to make this very substantial market more accessible to financial institutions.

AAVE Fees & Limits

AAVE has no hidden fees with no minimum and maximum balance requirements. It is completely free to deposit and withdraw funds. You only pay transfer fees for the network you used to send funds.

AAVE doesn’t charge any fee from loans. AAVE network pays miners a network fee. AAVE pays its costs by using the spread between its lending and borrowing rates difference. But you won't be charged for any kind of fee.

AAVE has no minimum or maximum amount. You can deposit as much as you can and borrow funds as much as of worth of your collateral.

AAVE Countries

AAVE's supports the following languages: English.

AAVE Key Data

Company

Legal name	Aave SAGL
Year founded	2,017
Country incorporated in	Switzerland
Headquarters country	United Kingdom
Decentralised	Yes
Number of employees	50-100
Total assets under management	$18,000,000,000USD

Products

Savings accounts	Yes
Loans	Yes
Crypto to crypto exchange	Yes
Fiat to crypto exchange	No
Pro exchange marketplace	No
Peer to peer exchange	No
Margin trading	No
Corporate accounts	Yes
Instantly buy crypto with fiat	No
Integrated crypto wallet	Yes
Crypto withdrawals to private wallet	Yes
Fast account verification	Yes
Futures exchange	No

Security

Cold storage	No
Two factor authentication	No
Know your customer	No
Credit check	No
Regulators	Regulated in the UK by the Financial Conduct Authority

Support

24/7 support	No
Email support	Yes
Phone support	No
Chat support	No

Fees

Exchange fees	0% exchange fees
Withdrawal process	The AAVE platform is fully decentralised and all deposits and withdrawls are handled completely automatically. This means withdrawls are very fast, and simply depend on the speed of the Ethereum network or side chain. There are no records of AAVE withdrawls being halted or frozen.
Savings crypto account withdrawal limit	Unlimited
Loan crypto account withdrawal limit	Unlimited

Investment Strategy

Liquidity pools	Yes
DeFi products	Yes

Key People

Stani Kulechov

Founder and CEO

Jordan Lazaro Gustave

COO

Irene Fucile

Head of Business Development

Rowan van Ginkel

Creative Director

Pablo Candela Andrade

User Success Manager

Andrey Kozlov

Full Stack Developer

Antea Knežević

Graphic Designer

Emilio Frangella

Full Stack Blockchain Developer

Ernesto Boado

Full Stack & Blockchain Developer at Aave

Hadrien Charlanes

Ethereum Engineer

Marc Zeller

Integration Lead

Licenses & Certifications

Financial Conduct Authority

Useful Links

AAVE Contact Details

Platform Comparisons

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