What is Aave (AAVE)?
Aave is a lending app built from smart contracts. People deposit crypto to earn interest, and others borrow against crypto they put up as security. AAVE is the token that governs Aave and helps cover losses if something goes wrong.
Where it came from
Aave launched its lending markets in early 2020. Its earlier token, LEND, was swapped for AAVE in 2020 at 100 LEND for 1 AAVE.
How it works
Lesson 43 explains crypto lending and borrowing step by step. In short:
- Lenders deposit tokens into a pool and earn interest.
- Borrowers must first deposit more value than they borrow, called collateral.
- If the collateral's value falls too far, it is sold automatically to repay the loan. This is called liquidation, and Lesson 43 shows how it works.
Each market has its own rules on which tokens are accepted, how much can be borrowed and how interest is set.
The AAVE token
- Supply. 16 million AAVE: 13 million went to LEND holders and 3 million to a reserve that holders control.
- Governance. Holders vote on changes, directly or by delegating their vote.
- Safety Module. Holders can lock AAVE as insurance. If Aave's markets end up short, called a shortfall, staked AAVE can be used to cover it. Stakers are paid rewards and a share of fees for taking that risk.
What people use it for
People lend and borrow on Aave, and hold AAVE to vote or to stake in the Safety Module.
Risks to know
- Liquidation. Borrowers can lose their collateral quickly in a price drop. Lesson 43 shows how.
- Staked AAVE can be cut. Staking in the Safety Module means accepting that part of your stake may be used to cover losses. Lesson 50 explains how to judge a staking offer.
- Smart contract and price feed risk. Aave depends on its code and on price data from outside. Lesson 45 covers these risks, and the Chainlink guide explains price feeds.
- Price swings. AAVE can fall far and fast, like other tokens.
Learn more
Lesson 43 covers lending and borrowing, Lesson 44 explains where yields come from, and Lesson 45 covers the risks of DeFi.
Aave is a large crypto lending app. AAVE, capped at 16 million, lets holders vote and can be staked as insurance that may be used to cover the app's losses.
These guides explain how each coin works. They are not recommendations, and we do not tell you what to buy. Prices can fall, and you can lose everything you put in.
Sources
- Aave: Aavenomics flashpaper
- The Block: Aave details its decentralisation bid and swap to a new token (July 2020)
- Aave documentation: Overview
Facts checked against these sources on 13 October 2026. Each guide is checked again every month.
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