Aave is a decentralized financial protocol where users have the option to participate as depositors or borrowers. Depositors provide the market with liquidity for passive income, while borrowers can borrow with over-collateral (perpetual) or low-collateralisation.
Like other decentralized loan protocols, Aave relies on two types of users: those depositing digital currencies within lending pools and borrowers interested in making a loan with an early collateral. The Aave protocol has been audited many times and is perfectly secured. It is widely recognized as being completely public and transparent, allowing anyone to interact with the UI client, API, or directly with smart contracts on the Ethereum network.
The AAVE token is used as a critical element for managing the entire Aave protocol. AAVE is used to vote and decide the results of Aave Improvement Proposals (AIP). Additionally, AAVE can be stacked inside the Aave protocol to provide protocol security, insurance, and depositors. Stakers using this decentralized financial application earn rewards and pay protocol stacking fees.