The cryptocurrency industry underwent considerable shifts over the past three years. From abject speculation in late 2017 to understated progress in 2018, one key note persisted. Success, for blockchain technology and cryptocurrency, meant attracting the attention of traditional banking institutions. That investment never truly materialized – although some larger investment firms sought to extract value from the sector. Now, success at the bleeding edge of the blockchain industry shows another way.
There is a clear appetite for decentralized finance within the cryptocurrency community. Person-to-person loans, interest on decentralized assets and a slew of other options – all without including traditional banks. At the forefront of innovation in this field is the Aave lending protocol. Their strong emergence into the market brought a massive increase in price – but for once, not due to speculation. Aave has done the impossible, rapidly bringing a workable product to market in the cryptocurrency industry.
What is Decentralized Finance?
Decentralized Finance, or more colloquially “DeFi,” is a system of financial vehicles that function entirely on the blockchain. As with a traditional bank, users can safely store excess funds in the system. These funds are then available to the other users through a variety of secured loans – the scope of which depends on the DeFi protocol in question. Aave offers many of these options, soon to include fully decentralized mortgage loans.
Those that fund the system gain interest in the same way as a bank – without the overhead, and all trustlessly performed by the protocol without human intervention. To be clear, the system is still in the absolute beginning stages. DeFi has barely moved beyond a proof-of-concept stage. However, it may provide an alternative to traditional banks sooner, rather than later.
Aave: The Impact of Progress
It is no secret that cryptocurrency development is often a ponderously slow endeavor. Occasionally this is by design – requiring consensus from the community to ensure fairness. Much of Aave’s success comes from rapid, solid development. After their release on the Ethereum mainnet in January, Aave grew rapidly, consistently and securely. In less than a year, they brought their managed fund to over $150 million USD.
By all accounts, Aave possesses the funding and development pool necessary to succeed. Such a well-prepared and efficient business is rare within the cryptocurrency industry – and the sector would greatly benefit from more companies that took the business aspect as seriously as they did the technology.
Article By: Adam Stone