What is AAVE? (Animated) Crypto Borrowing and Lending Explained

Summary

Aave is one of the largest DeFi lending protocols. This Whiteboard Crypto video explains how users supply assets to earn interest, how borrowers can take out collateralized loans, what over-collateralization means, and what happens when positions are liquidated.

Key Concepts

Things To Remember

• DeFi loans are over-collateralized — you must deposit more than you borrow.
• If your collateral value falls too low, your position can be automatically liquidated.
• Interest rates in DeFi are set algorithmically based on supply and demand.
• Smart contract risk means DeFi protocols can be exploited.

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