Exploring a crypto loan system by example

We have discussed many financial terminologies and mathematics in this chapter, and it may be hard for you to understand all of them. In the last section of this chapter, we will use an example of the DeFi lending protocol Aave to help you understand the concepts we have explored in this chapter.

An introduction to Aave

Aave (https://aave.com/) is one of the most popular lending protocols that offers crypto lending and borrowing services. At the time of writing, the protocol has locked over 10 billion US dollars’ worth of on-chain assets across 8 blockchain networks.

The Aave protocol has two versions that are open to the public – version 2 and version 3. The workflows and concepts in the Aave protocol version 2 are consistent with the protocol we will build in this book. However, we will also introduce the new features in the Aave protocol version 3 as an advanced topic, allowing you to broaden your knowledge of crypto...