Aave is one of the largest decentralized lending protocols in crypto, allowing users to deposit assets to earn yield or borrow against their holdings without intermediaries. Originally launched as ETHLend in 2017 by Stani Kulechov in Helsinki, Finland, the project rebranded to Aave (Finnish for “ghost”) in 2020 and quickly rose to become a DeFi cornerstone.
The protocol works through liquidity pools where depositors supply assets and earn interest, while borrowers post collateral to take out loans. Interest rates adjust algorithmically based on supply and demand — when utilization of a pool is high, rates increase to attract more deposits and discourage additional borrowing.
Aave introduced several features that became standard across DeFi. Flash loans, one of its most notable innovations, allow users to borrow any amount without collateral as long as the loan is repaid within the same transaction. This unlocked entirely new use cases like arbitrage, collateral swaps, and self-liquidation that weren’t possible in traditional finance.
The protocol runs on multiple blockchains including Ethereum, Polygon, Avalanche, Arbitrum, and Optimism, with tens of billions of dollars deposited across all markets. Aave V3, the current version, brought features like cross-chain portals, high-efficiency mode for correlated assets, and isolation mode for newer tokens with limited risk exposure.
Aave has also expanded beyond crypto-native DeFi. The company launched Aave Arc, a permissioned version designed for institutional participants, and GHO, a decentralized stablecoin backed by Aave deposits. Based in London with a globally distributed team, Aave Companies (the development entity) continues to push the protocol into new markets and use cases.
