Are you looking for new and creative ways to invest your income and generate wealth? Despite the buzz surrounding it, the world of cryptocurrency remains largely unexplored territory for most traditional investors. If you play your cards right, it can be an exciting and lucrative avenue to explore.
To those who are unfamiliar, terms such as “blockchain” and “cryptocurrency” can be intimidating. That’s why in this guide we’re going to be explaining, in simple terms, one of the most promising concepts in crypto today.
If you’ve been hearing the name and wondering “what is Aave?” then you’ve come to the right place. Read on for a super simple breakdown now.
How It Works
Aave is essentially a marketplace for buying and selling cryptocurrencies. Where it stands out, however, is its focus on lending and borrowing cryptocurrency via a pooled liquidity system. When you add money to a liquidity pool for others to lend from, you can make passive income on your contribution.
The General Idea
In the simplest terms possible, it’s a platform that facilitates crypto lending. You can buy and sell multiple different types of cryptocurrencies, as well as the currency that’s associated with the platform: Aave coin. Click here to buy Aave coin.
Aave is an example of what’s known as decentralized finance. What does this mean exactly? Decentralized finance (or DeFi for short) refers to financial instruments that don’t rely on any intermediaries in light of the fact that they utilize smart contracts on a blockchain.
What, then, is a blockchain? Think of a blockchain as a digital ledger of sorts. It keeps a record of all transactions pertaining to a particular cryptocurrency token while guaranteeing the fidelity and security of this information thus eliminating the need for a trusted third party.
The Nitty Gritty
Let’s get into some of the more complex ideas. Aave describes itself as An open-source and non-custodial liquidity protocol. Don’t worry if you don’t understand the majority of this sentence—these are pretty technical terms.
The term open source simply means that a piece of technology has code that anyone is able to see, use, or modify. While this might sound dubious at first, it’s actually a good sign. It means that the team that built out the code is confident enough in its ability and security to let everyone take a peek inside and adopt it if they wish.
Now, what about non-custodial liquidity protocol? A protocol here merely refers to the basic set of rules that allows data to be shared between computers. In this case, in particular, the liquidity protocol establishes the structure of the blockchain and the platform.
Non-custodial means that Aave will never hold or possesses your cryptocurrency assets. This gives you the peace of mind that the platform cannot simply take your money away from you.
What Is Aave?
We hope this has given you a better understanding of what is Aave and opened your eyes to the wonderful opportunities the world of cryptocurrency can offer. If you’re looking for more cryptocurrency content, we’ve got plenty. Check out the rest of our articles now.
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