Let’s take our weekly look at how the DeFi sector of the cryptocurrency market behaved in comparison to the overall landscape, along with a quick review of an important asset in this sector.
As we can see, the recent upswing of the cryptocurrency market translated into great benefits for the DeFi sector, which managed to briefly break the $1 billion mark for the first time in almost 3 months, growing over 16% in the span of 7 days.
However, a recent plunge has been experienced in cryptocurrency with the overall market dropping nearly 10% in the span of 2 hours in the morning of June 2nd. This left the DeFi Market trading around the $950 million mark, with possibilities of growing if the cryptocurrency market reacts to the recent events and users stabilize the trading dynamics to sustain the market’s growth.
For today’s quick review, we take a look at Aave (Finnish for “Ghost”), an open source non-custodial Ethereum protocol that powers a decentralized lending and borrowing platform that relies on the creation of 1:1 aTokens that match the total supply of every supported cryptocurrency.
The lenders deposit the desired amount of tokens into the pool, where they start generating collateral interests in aTokens that can later be redeemed. Borrowers are allowed to requests amounts defined by the collateralization ratio and the liquidation threshold of each asset, and interest rates for each loan are calculated algorithmically, but Aave allows borrowers the option of a more stable fee.
By offering the borrowers different options and guaranteeing collateral income to the lenders, Aave positions itself as a stable system that has endured since its conception in early 2020. As the DeFi market keeps reacting to the movements of cryptocurrency, so will projects like Aave, which makes it relevant to follow in the following months.