How To Buy Aave (AAVE)?
A common question you often see on social media from crypto beginners is “Where can I buy AAVE?” Well, you’ll be happy to hear it is actually quite a simple and straightforward process. Thanks to its massive popularity, you can now buy AAVE on most cryptocurrency exchanges, including Coinbase and Binance in 3 simple steps.
Step 1: Create an account on an exchange that supports Aave (AAVE)
First, you will need to open an account on a cryptocurrency exchange that supports Aave (AAVE).
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In order to sign up, you will need to enter some basic information, such as your email address, password, full name and, in some cases, you might also be asked for a phone number or address.
Note: On specific exchanges, you might need to complete a Know Your Customer (KYC) procedure in order to be able to purchase cryptocurrency. This is most commonly the case with licensed and regulated exchanges.
Step 2: Deposit funds into your account
Many cryptocurrency exchanges will allow you to purchase Aave (AAVE) with fiat currencies, such as EUR, USD, AUD and others. Furthermore, they will also provide you with multiple deposit methods through which you can fund your fiat account, such as credit and debit cards, ewallets or direct bank transfers.
Note: Some payment methods will have higher fees than others, such as credit card payments. Before funding your fiat account on your chosen exchange, make sure to do your due diligence to find out the fees involved with each payment method to avoid unnecessary costs.
Step 3: Buy Aave (AAVE)
This process is similar across almost every cryptocurrency exchange. All you have to do is find a navigation bar or a search bar, and search for Aave (AAVE) or Aave (AAVE) trading pairs. Look for the section that will allow you to buy Aave (AAVE), and enter the amount of the cryptocurrency that you want to spend for Aave (AAVE) or the amount of fiat currency that you want to spend towards buying Aave (AAVE). The exchange will then calculate the equivalent amount of Aave (AAVE) based on the current market rate.
Note: Make sure to always double-check your transaction details, such as the amount of Aave (AAVE) you will be buying as well as the total cost of the purchase before you end up confirming the transaction. Furthermore, many cryptocurrency exchanges will offer you their own proprietary software wallet where you will be storing your cryptocurrencies; however, you can create your own individual software wallet, or purchase a hardware wallet for the highest level of protection.
For more in-depth instructions, our ‘Absolute Beginner’s Guide To Cryptocurrency Investing‘ will take you through the process step-by step. In addition to providing instructions for sending and receiving your cryptocurrency.
And if you’re completely new to crypto our beginner, intermediate and advanced level articles will get you up to speed with everything you need to know about the cryptocurrency space starting out.
What Is Aave (AAVE)?
AAVE is the native governance token of the Aave protocol. Holders of the Ethereum-based cryptocurrency can discuss and vote on proposals that affect the direction of the project.
So, through the 2018 and 2019 bear market, the ETHLend team overhauled its product, releasing Aave at the start of 2020.
In a podcast, Kulechov said that the bear market was one of the best things that could have happened to ETHLend. This is in reference to the opportunity he and his team was given to revamp the concept of decentralized cryptocurrency lending, creating what we now know as Aave.
How Aave works
The new-and-improved Aave is similar in concept to ETHLend. Both allow Ethereum users to obtain cryptocurrency loans or earn a return by lending out their holdings. But, at their core, they are different.
Aave is an algorithmic money market, meaning loans are obtained from a pool instead of being individually matched to a lender.
The interest rate charged is dependent on the “utilization rate” of the assets in a pool. If nearly all assets in a pool are used, the interest rate is high to entice liquidity providers to deposit more capital. If nearly no assets in a pool are used, the interest rate charged is low to entice borrowing.
Other key features
More often than not, there is much more liquidity in Aave’s money-market pools than loans required by borrowers. This unused liquidity can be used by those that take flash loans, which are uncollateralized loans that only exist for the span of one Ethereum block.
Basically, a flash loan allows a user to borrow a large amount of cryptocurrency without posting collateral, then return the loan within the same transaction (as long as they pay the one-block interest fee).
While ETHLend rebranded as Aave, its token LEND stuck around. This was a concern because LEND did not have the proper code to work in the way that the Aave team wanted. Namely, LEND holders could not control the direction the Aave protocol was heading in.
This was an issue as Aave garnered an increasing amount of liquidity and its users couldn’t enact change on the protocol. Then, it was proposed that LEND would be transitioned to a new coin called AAVE at a 100 LEND to one AAVE ratio.
First, AAVE holders will act as a backstop for the protocol. The release of AAVE introduces a new concept called “Safety Module,” which protects the system from a shortage of capital. This means that if there isn’t enough capital in the protocol to cover lenders’ funds, the AAVE in the Safety Module will be sold for the assets needed to cover the deficit.
Only AAVE that is deposited in the module will get liquidated for the deficit. Deposits into the module are incentivized with a regular yield paid in AAVE.
AAVE’s second key use case is related to the governance of the Aave protocol. Holders of the cryptocurrency can discuss and vote on Aave Improvement Proposals, which can be implemented if accepted by a minimum number of AAVE tokens. This includes changing the parameters of Aave’s money market, along with managing the funds in the ecosystem reserve. Like with many other governance tokens, one AAVE is equal to one vote.
Official website: https://aave.com/