Aave is a decentralized non-custodial finance protocol where users can act on the network as depositors or borrowers. It was initially issued in 2017 with an Initial Coin Offering (ICO) that raised $16.2 million, known as ETHLend. In 2020 it was revised and rebranded to Aave protocol.

Aave is perhaps best described as a system of lending pool contracts, that allows depositors to earn interest when providing funds while borrowers can get overcollateralized loans using this liquidity. It is managed by a distributed network of computers running its software which approves the creation of lending pools with a support capacity of several different assets, many of which are stablecoins. As with other DeFi platforms, upon deposit, are minted interest-bearing tokens known as aTokens, which are pegged to the value of another asset. In the process where the asset is loaned out to borrowers, aTokens gain interest in real-time.

The protocol is implemented as a set of smart contracts on top of the Ethereum blockchain using the Ethash algorithm and Proof of Work consensus. Smart contracts guarantee safety and do not require a middleman. AAVE is an ERC-20 token with a finite supply of 16,000,000.