In recent years, buying and selling cryptocurrencies has become a trend. More and more traders and investors are investing their money in them. But, in particular, what are cryptocurrencies and what are they for? Cryptocurrency is a blockchain-based virtual currency that acts like a ledger: transactions are recorded in it and has independent programmers as reviewers. This way, transactions do not go through one central location, but are approved from different sites. Cryptocurrency consists of a digital file with a unique code that is read by various programs that are used to view, store and execute transactions. In simple terms, it is a new form of money that offers a different way to interact with it.
What are cryptocurrencies used for? Investment is one of their strengths, but it was also created as a means of payment. In a sense, cryptocurrencies are starting to play the role of "equivalents" to other goods, but to a greater extent they are signs of value. The fact that cryptocurrencies are subject to significant speculative price fluctuations introduces into the four markets (labor, commodity, capital and technology) price movements that are difficult to predict and control, making accounting very vulnerable to inflation.
Thus, cryptocurrencies are just as speculative as securities and represent a token of value as inflationary as credit money, even though they are used as an alternative response to the almost exclusive dominance of the international monetary system by the currency that she releases.
Cryptocurrencies are world currencies that are not always dependent on the economy or politics of a particular country. Anyone can access them and they can be instantly shared with anyone anywhere in the world. Cryptocurrencies are decentralized: there is no official market yet, which means they can be traded 24 hours a day!
Digital currencies often experience significant price fluctuations suddenly. This makes them as speculative as securities, credit money, floating exchange rates, but at the same time they represent an alternative response to the almost exclusive dominance of the international monetary system.
The topic of today's review is the popular ghost cryptocurrency Aave. How is it interesting? And why should traders take a closer look at it?
Aave - what is it?
In the world of decentralized finance or DeFi, there are many exhibitors and services on Ethereum, and one of them is AAVE. AAVE is a decentralized lending platform that has become one of the largest and longest-running projects in the sector.
AAVE (translated as "ghost") is a DeFi project running on the Ethereum blockchain.
This project was originally called ETHLend. From the very beginning, it aimed to allow users to lend their cryptocurrencies to the service of third parties by providing loans.
At first, maintenance was very simple as there were two modes:
- The lender opened a loan position under certain conditions and it was listed on the platform. At this stage, users interested in loans could see the offers and accept what they were most interested in.
- The user can make a request for a loan, which can be fulfilled by the lender if he accepts the terms specified in the request.
The platform was originally based on ETH and several ERC-20 tokens. But gradually the variety of tokens increased. The platform allowed cryptocurrencies, even such as bitcoin, to be used as collateral, being very flexible in this regard.
The history of the creation of Aave
The history of AAVE begins with the creation of the ETHLend platform, which began work in 2017. This platform was created by Stani Kulchov. Stani saw an opportunity to create a decentralized custodian market based on Ethereum smart contracts.
Kulchov's idea is simple: let users make money by making loans. Thus, third parties can benefit from these loans by using them as leverage or simply spending them as they see fit. Then they can pay off the loan little by little and get back their property. They even had the advantage that if the asset's price increased, the maturity of the loan would close quickly.
Along with this strategy, the platform's own token (LEND token) allowed users and lenders to generate profits that could be exchanged for other credits on the platform.
The success of this idea was enormous: in September 2018, ETHLend changed its name to AAVE. Behind this change, a whole transformation also began in his model. AAVE was committed to taking lending to the next level. For this, the first mass-market platform for liquidity pools was created. This is in order to obtain sufficient liquidity for operations. However, it wasn't until January 2020 that AAVE Version 1 was finally launched on the mainnet, the protocol that finally made it all possible. With this launch, the old ETHLend platform will be completely abandoned.
Development of AAVE continues with the launch of its AAVE token and finally at the end of 2020 with the launch of AAVE Version 2, the current AAVE protocol in force.
How does AAVE work?
AAVE's business is a lending / borrowing market. On it, investors can inject liquidity into a specific pool. This is to receive dividends from the commission for each operation performed in the specified pool on the platform. This system in AAVE works with an algorithmic system like AMM, as it does on other platforms. Thus, the entire system of rewards, commissions and asset values is linked to a powerful system, automated using smart contracts.
For example, if a pool is in high demand, this would result in a slight increase in the value of the assets in that pool along with the interest rate, which would mean higher commission income for its investors. This works as an incentive mechanism for investors to invest more capital in the pool to meet the demand for these assets.
To secure loans and avoid losses, AAVE asks the user to provide collateral. The specified collateral must consist of tokens supported by the platform and must be deposited and insured in order to receive the loan. In fact, to avoid losses due to falling cryptocurrency prices, loans in AAVE are oversecured.
This means that in order to receive a certain loan, you will need to deposit a little more than this amount on the platform.
Benefits of Aave
- Availability. Since users can receive Aave using a smartphone or computer, Aave is theoretically available to all users without access to traditional banking systems.
- As with many online payment systems, Aave users can pay with their coins wherever there is internet access. This means shoppers don't have to travel to a bank or store to buy a product.
- Decentralization. Blockchain technology manages a database containing transaction records. Decentralization involves only two parties to a transaction, that is, the sender and the recipient. You no longer have to deal with third parties. There is no one to follow what you are doing.
- Stability. Traditional currencies can be manipulated by central banks and the government, not with Aave.
- Safety and reliability. No way to fake Aave code or copy it.
Should you invest in Aave in the Philippines?
For those investors who believe that decentralized lending will continue to grow, Aave can be considered quite attractive.
Possession of digital currency gives users special privileges on the Aave platform. Among them are discounts on transactions and commissions. And since Aave is one of the largest DeFi lenders, Aave is highly liquid.
In terms of durability and stability, the Aave platform continues to be one of the largest in the DeFi space!
However, investing in cryptocurrency requires knowledge of how different platforms, tokens and coins work. Unlike stock and bond markets, crypto markets are relatively new, largely unregulated, and rapidly evolving. Despite the fact that this provides a large number of opportunities for investors, first you need to study the market well with all its features in order to achieve positive results.
How to invest in Aave in the Philippines?
To begin with, you must choose a way of investing for yourself. The main thing to think about is whether you want to invest in cryptocurrency or trade more actively with it.
If your goal is a long-term investment, you should probably create a wallet and buy a "physical" Aave cryptocurrency to store there. This is an unregulated market with all the typical pitfalls. Also, Aave is available on almost all major cryptocurrency exchanges, including Binance, Uniswap, Huobi, Bilaxy and others. To buy Aave in the Philippines, you can use Binance, a popular crypto-to-fiat exchange.
If, on the other hand, you want to trade Aave more actively in order to take advantage of fluctuations, this is probably the best approach to trading as CFDs (Contracts for Differences).
Then you also have the option to “sell” the cryptocurrency if you expect it to drop in value. This way, you don't have to start by buying the Aave asset itself.
The most noticeable difference in trading cryptocurrencies through a CFD broker for most people will be that you don't have to deal with a so-called cryptocurrency wallet, with the risks that often come with it.
If, on the other hand, digital currencies are traded with CFDs, they will in practice be kept just like everything else in your trading account, at the same time that you are protected by the security it provides for use by a licensed broker. Therefore, for many, it is very often preferable to trade through brokers. Brokers are highly regulated and only licensed brokers with securities licenses from their respective financial supervisors can offer this type of securities trading.
Aave's price stability, scalability and liquidity all make this digital currency attractive to investors. The coin is very popular in the media, which has steadily led to its noticeable rise in popularity. Thus, there is a lot of evidence to suggest continued growth.
With a reliable trading platform, there is a good opportunity for investors looking to try Aave. You will receive a secure and regulated service, the ability to buy, sell and get help around the clock. Tips and advice from certified experts will help you in your endeavors!
Try it and you will definitely succeed!