Frequently Asked Questions

Aave is a decentralized, non-custodial liquidity protocol where users can participate as suppliers or borrowers. Suppliers provide liquidity to earn interest, while borrowers can access funds by providing over-collateralized assets. Aave operates entirely through smart contracts, meaning no central authority controls your funds. Founded in 2017, Aave has become one of the largest DeFi protocols with billions in total value locked.

Aave employs extensive security measures including audits by leading firms (Trail of Bits, OpenZeppelin, SigmaPrime), bug bounty programs, formal verification, and governance-controlled risk parameters. However, all DeFi protocols carry inherent risks including smart contract vulnerabilities, oracle failures, and market volatility. Never invest more than you can afford to lose and always do your own research.

Aave v3 is deployed on multiple networks including:

• Ethereum Mainnet
• Polygon (PoS and zkEVM)
• Arbitrum
• Optimism
• Avalanche
• Base
• BNB Chain
• Gnosis Chain
• Scroll
• And more...

Check the official Aave app for the complete list of supported networks.

The AAVE token serves multiple purposes:

• Governance: Vote on protocol proposals and parameter changes
• Staking: Stake in the Safety Module to earn rewards and help secure the protocol
• GHO Discounts: Staked AAVE holders get reduced GHO borrowing rates
• Protocol Revenue: Stakers may receive a share of protocol fees

To start using Aave:

• Step 1: Get a Web3 wallet like MetaMask, Coinbase Wallet, or a hardware wallet
• Step 2: Acquire crypto assets on a supported network (Ethereum, Polygon, etc.)
• Step 3: Visit app.aave.com and connect your wallet
• Step 4: Supply assets to earn interest or use them as collateral to borrow

We recommend starting with small amounts to understand how the protocol works.

No! Aave is a non-custodial protocol, meaning there's no account creation, email registration, or KYC required. You simply connect your wallet and start using the protocol. Your wallet address serves as your identity, and you maintain full control of your funds at all times.

Aave supports most major Web3 wallets including:

• MetaMask (browser extension and mobile)
• Coinbase Wallet
• WalletConnect (supports 100+ wallets)
• Ledger and Trezor (hardware wallets via MetaMask)
• Rainbow Wallet
• Gnosis Safe (multisig)

When you supply assets to Aave, you deposit them into a lending pool. In return, you receive aTokens (like aUSDC or aETH) representing your deposit plus accrued interest. Your aToken balance automatically increases over time as interest accrues. You can withdraw your original assets plus earned interest at any time, subject to available liquidity.

To borrow on Aave:

• First, supply assets as collateral
• Based on your collateral's LTV ratio, you'll have borrowing power
• Choose the asset you want to borrow and the amount
• The borrowed assets are transferred to your wallet immediately
• Interest accrues on your borrowed amount over time
• Repay your loan plus interest whenever you want (no fixed terms)

Health Factor is a numeric indicator of your position's safety. It's calculated as: (Total Collateral × Liquidation Threshold) / Total Borrows. A Health Factor above 1 means your position is safe. Below 1 means you're eligible for liquidation. For example, a Health Factor of 2 means your collateral is worth twice what's needed to avoid liquidation. We recommend maintaining a Health Factor above 1.5 for safety.

Generally yes, you can withdraw at any time. However, there are two considerations:

• Liquidity: If utilization is very high (most assets are borrowed), you may need to wait for borrowers to repay
• Collateral: If you're using assets as collateral for a loan, withdrawing may affect your Health Factor and potentially trigger liquidation

E-Mode (Efficiency Mode) is an Aave v3 feature that allows higher borrowing power when supplying and borrowing correlated assets. For example, if you supply ETH and borrow another ETH derivative, you might get up to 93% LTV instead of the normal 80%. E-Mode categories include stablecoins, ETH-correlated assets, and more.

Aave uses an algorithmic interest rate model based on supply and demand. When utilization (borrowed amount / supplied amount) is low, rates are low to encourage borrowing. As utilization increases, rates rise to incentivize more deposits and discourage excess borrowing. Each asset has its own rate curve parameters set by governance.

• APR (Annual Percentage Rate): Simple interest without compounding
• APY (Annual Percentage Yield): Includes compound interest effects

Aave displays APY because interest compounds continuously (every block). APY is always higher than APR for the same rate due to compounding effects.

Yes, variable interest rates can change from block to block based on pool utilization. When more people borrow, rates go up. When more people supply or repay, rates go down. This is why you'll see rates fluctuate throughout the day. Stable rates (where available) are more predictable but can still be rebalanced under extreme conditions.

The difference (called the "spread") exists because:

• A portion of interest goes to the protocol reserve for security and development
• Not all supplied funds are borrowed at any given time (utilization < 100%)
• Suppliers share the interest from borrowers proportionally

Liquidation occurs when your Health Factor drops below 1, meaning your collateral no longer sufficiently covers your borrowed amount. Third-party liquidators can then repay a portion of your debt and claim equivalent collateral plus a liquidation bonus. This mechanism protects the protocol and other users from bad debt.

During liquidation:

• A liquidator repays up to 50% of your debt
• They claim equivalent collateral value plus a liquidation bonus (typically 5-15%)
• You keep any borrowed assets in your wallet
• You lose a portion of your collateral (the repaid amount plus bonus)
• Your Health Factor improves after liquidation

To avoid liquidation:

• Maintain a high Health Factor (we recommend >1.5)
• Monitor your position regularly, especially during volatile markets
• Set up alerts using DeFi monitoring tools
• Add more collateral if your Health Factor decreases
• Repay part of your debt to increase Health Factor
• Don't borrow near your maximum limit

The liquidation penalty (or bonus for liquidators) varies by asset, typically ranging from 5% to 15%. This means liquidators receive your collateral at a discount. For example, with a 10% bonus, a liquidator repaying $100 of debt would claim $110 worth of your collateral. Higher-risk assets generally have higher liquidation bonuses.

GHO is Aave's native decentralized stablecoin, soft-pegged to the US Dollar. Unlike borrowed assets in Aave, GHO is minted directly by users against their Aave collateral. It's overcollateralized, meaning users must deposit more value than they mint in GHO. The interest rate on GHO is set by Aave governance rather than algorithmic supply/demand.

There are two ways to get GHO:

• Mint: Supply collateral to Aave and borrow/mint GHO against it
• Buy: Purchase GHO on decentralized exchanges like Uniswap or centralized exchanges that list it

Minting allows you to maintain exposure to your collateral while accessing stablecoin liquidity.

Yes! Users who stake AAVE in the Safety Module (stkAAVE holders) receive a discount on GHO borrowing rates. The discount amount is set by governance and can make GHO one of the cheapest stablecoins to borrow in DeFi. The more stkAAVE you hold relative to your GHO debt, the larger your discount.

Aave's core protocol contracts have never been successfully exploited. The protocol has secured billions of dollars since 2020 without losing user funds to smart contract vulnerabilities. This track record is thanks to extensive auditing, bug bounty programs, formal verification, and conservative risk management. However, past security is not a guarantee of future security.

To verify you're using the official Aave:

• Always access Aave at app.aave.com
• Bookmark the official URL and only use your bookmark
• Check the SSL certificate shows "aave.com"
• Never click links in unsolicited emails or DMs
• Verify contract addresses against the official Aave Address Book on GitHub

If you suspect a scam:

• Don't interact with suspicious contracts or sign transactions
• Never share your seed phrase or private keys with anyone
• Report suspicious sites to the Aave Discord #security channel
• If you've interacted with a suspicious contract, revoke its approvals at revoke.cash
• Consider moving funds to a fresh wallet if compromised

Aave's fee structure:

• Deposits: No fee
• Withdrawals: No fee
• Borrowing: Variable interest rate (accrues continuously)
• Flash Loans: 0.09% fee (for standard flash loans)
• Liquidation: Bonus goes to liquidators (not Aave)

Note: You always pay network gas fees for blockchain transactions, which go to network validators, not Aave.

Gas fees are network fees paid to blockchain validators, not to Aave. On Ethereum mainnet, fees can be high during congestion. To reduce costs:

• Use Aave on Layer 2 networks (Arbitrum, Optimism, Polygon, Base) for much lower fees
• Transact during low-congestion periods (often weekends or early morning UTC)
• Use gas tracking tools to find optimal transaction times
• Batch actions when possible

A portion of borrowing interest (the reserve factor) goes to the Aave treasury, which is controlled by governance. These funds are used for:

• Protocol development and maintenance
• Security audits and bug bounties
• Ecosystem grants and incentives
• Safety Module backstop (in case of shortfall events)