Sites like Aave

Learn which CeFi and DeFi platforms offer similar services to this lending protocol.

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Aave is a decentralized finance (DeFi) lending protocol built on the Ethereum blockchain. The application allows users to lend and borrow a wide variety of digital currencies using both variable and stable interest rates.

In addition to lending and borrowing, Aave offers multiple other features including flash loans, uncollateralized loans, unique collateral types and rate switching.

While Aave offers one of the most feature-packed DeFi platforms it is often useful to compare the alternative options out there, including what is also available in the world of centralized finance (CeFi).

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

What is Aave?

After launching in 2017, Aave was initially known as ETHLend, an Ethereum-focused lending platform. However, in 2018, the platform changed its name to Aave after a rebrand that allowed it to integrate more platform features and crypto assets. The name Aave – the Finnish word for ghost – was chosen to represent the transparency that the platform brings to DeFi.

Currently, Aave offers one of the most diverse lending platforms within the decentralized finance sector. Thanks to its recent V2 upgrade, the platform experienced significant growth throughout both 2020 and 2021. The new upgrade integrated liquidity mining, gas optimisation and credit delegation features.

Aave's native cryptocurrency, AAVE, is used for both governance and utility on the platform. Token holders can vote on development proposals and can stake AAVE as part of the platform's insurance protocol to earn rewards and protocol fees.

What services does Aave offer?

Flash loans

Flash loans are loans that are issued and repaid within the same block of a blockchain. If the loan is not repaid within the same time block it was issued, the entire transaction fails.

Flash loans have quickly become one of Aave's main selling points as it requires no upfront collateral and allows users to capitalize on arbitrage opportunities. The lack of collateral requirements means there is minimal risk for the user and the failure of the transaction without repayment means there is minimal risk for Aave.

Aave charges a 0.30% fee on all flash loans.

For more information on flash loans please visit Aave's flash loan support page here.

Unique collateral

Aave users can now also use a wider range of cryptocurrency tokens as collateral for loans. Alongside the standard cryptocurrencies that can be used, such as ETH, DAI and AAVE, this wider range includes liquidity provider (LP) tokens and TokenSets. With this flexibility, users can withdraw a loan against a position that is already earning revenue.

Interest rate switching

Most lending platforms offer either stable or variable interest rates. While this is also true for Aave, the application also offers users the ability to switch between stable and variable interest rates. With the rate-switching function, users can switch between the 2 different types to capitalize on the best interest rates available at any given time.

Note: Stable rates on Aave are not fixed. Instead, the rates are a more stable form of the variable interest rates that Aave offers. The rates are more constant and less prone to market fluctuations.

Aave pay

Aave pay is a service that enables users in the European region to use their cryptocurrencies to pay for everyday items. The value of cryptocurrencies used is converted to fiat when the transaction is processed.

Users can also use the Aave pay feature to access fiat-based loans. Instead of cashing out cryptocurrency holdings, users can deposit cryptocurrency collateral into Aave in return for a fiat currency loan. That loan can be paid directly into a user's bank account.

The only fiat currency currently supported through this feature is the euro.

Supported assets on Aave

Aave currently supports over 20 different Ethereum-based assets including:

  • Maker (MKR)
  • USD Coin (USDC)
  • TrueUSD (TUSD)
  • Synthetix USD (SUSD)
  • Tether (USDT)
  • Synthetix (SNX)
  • Basic Attention Token (BAT)
  • Chainlink (LINK)
  • 0x (ZRX)
  • Aave (LEND)
  • DAI (DAI)
  • Ethereum (ETH)
  • Kyber Network (KNC)
  • Decentraland (MANA)
  • Augur (REP)
  • Wrapped BTC (WBTC)
  • Uniswap (UNI)
  • Ren Protocol (REN)

If you would like to start using Aave, you will need access to a compatible crypto wallet, such as Formatic, MetaMask or Coinbase Wallet. For a full range of Web 3.0 options, check out our guide here.

Please also visit our full Aave guide for a step-by-step tutorial on how to lend and borrow using the platform.

Sites like Aave

CeFi sites like Aave

Nexo

Nexo is a centralized cryptocurrency lending platform that offers users the opportunity to deposit assets in return for an annual percentage yield (APY). The platform offers cryptocurrency rewards on a wide variety of digital assets including BTC, ETH, EOS, TRX, LTC, XLM, ETH, BCH and XRP. APYs have been known to range between 6% and 12%.

Nexo acts as its own custodian for all deposits which means that it is classified as a CeFi platform. However, Nexo stands out from other CeFi lending firms because all custodial assets are backed by an insurance premium worth US$375 million. While this is lower than the US$12 billion of total assets under management, the insurance fund can provide some comfort to Nexo users.

Alongside earning interest on cryptocurrency assets Nexo also offers a further 2 products that are similar to Aave:

  1. Loans that are backed by digital currency collateral.
  2. A Nexo card that is backed by digital assets. The Nexo card allows users to access an instant crypto credit line in the same way a traditional credit card would.

Nexo also has a mobile app available that is free for IOS and Android devices.

BlockFi

BlockFi is another comprehensive CeFi lending platform. Alongside lending, the platform offers low-interest loans, a cryptocurrency exchange and the option for interest-bearing accounts. BlockFi charges zero fees on trading transactions and users are not required to maintain a minimum account balance.

BlockFi is often seen as a strong platform for beginner and intermediate crypto investors who would like to bridge the gap between crypto and traditional finance.

Note: BlockFi currently relies on the cryptocurrency exchange, Gemini, to store funds.

Some of the coins supported by BlockFi include BTC, USDt, USD, BUSD, GUSD, LTC, PAX Gold, Litecoin, ETH and LINK.

Unchained Capital

Unchained Capital is a CeFi lending platform popular for its multisig collaborative custody model. This strategy increases security while also providing borrowers more transparency over their collateralized assets.

Accessing collateralized assets requires 3 private keys. One key is controlled by Unchained Capital while the other two are controlled by the borrower and a third party agent.

Unchained Capital only serves customers from the United States of America and currently only offers Bitcoin loans. Those who wish to use the platform must also have a wallet from Ledger, Trezor or Coldcard.

Although Unchained Capital offers strong security features, the platform comes with a higher barrier to borrowing. The loan to collateral (LTC) figures on the platform are often lower and interest rates are higher than similar CeFi platforms.

DeFi sites like Aave

Compound Finance

Compound is another popular lending platform built within the Ethereum ecosystem. Like Aave, Compound users can deposit digital currencies and provide liquidity in return for earning interest on their deposit. All liquidity supplied to the platform can then be used by others for loans.

All liquidity provided to the Compound application is represented by cTokens. cTokens accrue the interest earned from the platform and are used when withdrawing your liquidity from the platform. A user can also use cTokens as collateral for loans.

While Compound does not charge borrowing fees, its loan to collateral (LTC) rates are higher than those offered by other DeFi applications, such as MakerDao. In addition to no borrowing fees, Compound has a low liquidation threshold and only liquidates 50% of any under-collateralized loans. The platform's liquidation penalty is fixed at 8%.

Alchemix

Alchemix is a DeFi lending platform that offers users the opportunity to access self-repaying loans. To use the platform, Alchemix users deposit the stablecoin, DAI, into a smart contract. In exchange, users receive a synthetic stablecoin, alUSD. The aIUSD is the tokenized version of all future yields.

Once DAI funds are deposited into the Alchemix platform, the funds are then transferred into a yearn.finance vault. Any yield generated from DAI collateral is then automatically used to repay Alchemix loans. Any alUSD tokens can then be exchanged back into DAI at a ratio of 1:1 on the Alchemix platform. Alternatively, the token can be traded on a decentralized exchange, such as SushiSwap.

Alchemix offers a loan to collateral ratio of up to 50%. This means that a user can mint an alUSD coin worth up to half the value of the asset they deposit.

Alchemix currently only accepts DAI as collateral but plans to accept more stablecoins in the future.

Oasis Borrow

Working in conjunction with the MakerDAO lending protocol, Oasis Borrow is a hub for creating, saving and exchanging the stablecoin, DAI. Maker is currently one of the largest lending platforms in the DeFi space with over $7.3 billion in locked assets and more than $2.7 billion in outstanding loans.

Users of Oasis Borrow have the ability to open a Maker Vault and mint DAI tokens. DAI tokens can then be used to increase exposure, withdraw liquidity and earn extra passive income.

Through Oasis Borrow. Maker offers 75% and 50% loan to collateral rates for its crypto loans. The higher rate also receives higher stability fees. If an account's LTC ratio falls below the agreed rate, the Maker smart contract will automatically begin liquidating assets to recoup costs. There is also a liquidation penalty of 13%.

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Why you might want to avoid Aave

Like all DeFi applications, Aave comes with its own set of risks.

One prominent risk is the risk of smart contract malfunction. Although smart contracts provide the automation necessary for the decentralized finance industry, they are programmed by humans. This means there is a chance that malfunctions and bugs may occur. As smart contracts are designed to be immutable, any malfunction could result in a loss of funds.

In addition, many DeFi applications have been the target of hacks over the last few years – with varying levels of success. Although there have been no successful attempts made on Aave, the risk remains high.

To unburden some of this risk, Aave has created a safety module that is composed of the native AAVE token. Users can stake the AAVE token in the safety module to earn rewards. In the case of an emergency, the safety module would be used to repay Aave users or keep operations running smoothly.

Bottom line

Aave is a popular DeFi lending platform that experienced massive growth in 2020 and 2021. However, it is not the only site that offers lending services. When looking at where to put your cryptocurrency assets to work, it is a good idea to look at both decentralized and centralized options.

While decentralized options may offer higher rates, the rates may be unstable and come with an added security risk. On the other hand, centralized platforms can offer more security and peace of mind, but lack the performance of decentralized equivalents.

Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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