In recent times, borrowers are no longer going to banks for availing loans. This has led to the popularity of Decentralized Finance (DeFi). Which among those is connecting borrowers directly with lenders? It is Aave.
Are you that entrepreneur who wants to use blockchain technology and smart contracts in disbursing credit? Launch an Aave clone app now.
How does an app like Aave work?
- Borrowers need to create an account on the DeFi platform. They need to link their Ethereum-compatible wallet.
- Depositors must provide liquidity to the intermediary-free lending platform. They get passive income when debtors borrow an amount. Persons who need loans can select their preferred virtual currency. They can choose options like cryptocurrencies, DeFi tokens, and stablecoins.
- Generally, the interest rate will be imposed on an Annual Percentage per Year (APY).
- Borrowers can utilize options like variable and stable to prevent extreme fluctuations. Thus, there is a greater chance of repayment without any delay.
- Liquidity Providers (LPs) are the backbone of an app like Aave. They can utilize their deposits and strategically trade their assets. There are 2 options in place, Short and Long. Based on the changes in market conditions and the level of demand by borrowers, depositors can increase their wealth.
- What about maintenance of the reserve of funds? Liquidity pools are set up on other DeFi platforms. This protects the deposits of lenders as the amount would be returned by borrowers without any delay. Borrowers need to maintain the collateralization ratio at an optimum level to prevent issues.
Wrapping Up
Aspiring to overtake rivals in the multi-billion-dollar DeFi sector? Contact a DeFi creation enterprise for Aave clone app development now.
Author's Bio:
Christopher Willson is an ardent believer in life morals, a writer by profession, an aspiring author and a creator, who believes in his existence for literature. He, being an extrovert, has no qualms talking to all sorts of people. When he is not writing, you can find his indulged in reading, dancing and day dreaming to change the World!
