The birth of the Aave protocol marks Aave’s move from a decentralized P2P lending strategy (a direct lending relationship between lenders and borrowers like ETHLend) to a pool-based strategy: lenders provide liquidity by depositing cryptocurrency into a pool contract.
Interest rates for both borrowers and lenders are determined by algorithms.
For the borrower, it is determined by the cost of money, i.e. the amount of funds available in the pool at a given time.
When funds are borrowed from the pool, the amount of available funds decreases and interest rates increase.
At the heart of lending pools is the concept of reserves. Every pool holds reserves in multiple currencies, with the total amount of Ethereum defined as total liquidity. The reserves accept deposits from lenders. Every reserve has a certain loan-to-value (LTV), which is calculated as a weighted average of the different LTVs in the currencies that make up the collateral, where the weight of each LTV is the equivalent amount of the currencies that make up the collateral.
Collateral in ETH;
Each reserve has a specific loan-to-value (LTV), which is calculated as a weighted average of the different LTVs of the currencies that make up the collateral, with each LTV weighted to an equivalent amount of collateral in ETH.
Lending Pool Core
The LendingPoolCore contract is the heart of the protocol and holds the state of all reserves and all deposited assets.
It handles the basic logic (index accumulation, interest calculations, etc.).
The Aave protocol implements a tokenization strategy for liquidity providers: upon depositing, depositors receive a corresponding amount of derivative tokens called Aave tokens.
The two major innovations of the Aave protocol are
Stable interest rates – Helps borrowers plan their finances
Flash Loan Interest Rate – When you borrow money without collateral in a single transaction.
AAVEUSD has surged by over 20% in the past two days. It has risen above the short-term (21 and 55 EMAs) and long-term moving averages. It reached a high of $102.87 and is currently trading around $102.56.
A bullish invalidation could occur if the pair closes below $70. On the downside, the short-term support is at $95. A break below this would target $90 or $85. A break below $85 would target $70.
The short-term resistance for the pair is around $115. A break above this will confirm a mild bullish market. A rally to $130 or even $150 is also possible. A break above $155 will see a rally to $200.
.
With a target price of $125/$150, buying at lows around $85 with a SL around $70 would be a good idea.
Token Post | [email protected]
