Users are able to both lend and borrow various crypto-coins, whether it’s Stablecoins or Altcoins, through the input of Ethereum-based coins. In the case of lending, users would be required to input their coins into the system’s coin pool to allow others to borrow them through said pool. Once a user has borrowed their coins, an interest fee would be enforced, wherein the borrower would have to return both the coins and system-demanded fees. The interest fee rate is dependent on the particular pool’s demand for various coins. If the coin is in low supply, the interest rate would be multiplied and if high, the rates would be adjusted to be low to stimulate increased borrows.
The Aave platform is also adept in creations of Flash loans. A flash loan is a variation of loans that does not require an input of collateral, but loans obtained must be returned before the Ethereum block in relation is closed, meaning flash loans are beneficial for short-terms borrows for immediate profit. It is also required that once the profit has been made, the borrower must return the funds with an additional interest fee.