Aave is a DeFi protocol that supports multiple crypto loans and is built on Ethereum. You can participate in liquidity pools, lend and borrow, and access other DeFi services. Aave’s role in popularizing flash loans is likely its claim to fame. You obtain aTokens when you deposit your tokens into Ave to lend money. The interest you earn depends on the cryptocurrency you are lending, and these serve as your receipts.
An interest-bearing token can be staked as collateral in the multi-chain, DeFi project Abracadabra. When users deposit money into a lending pool or yield optimizer, they receive interest-bearing tokens in return. You can access both your initial deposit and any interest received by holding the token.
By using your interest-bearing tokens as security for a Magic Internet Money (MIM) stablecoin loan, you can further increase the value of your holdings. One way would be to place stablecoins in a yield-farming smart contract and then generate MIM using the interest-bearing tokens. The likelihood of liquidation will stay low as long as your stablecoins don’t encounter volatility.
In addition to providing exchange services, Binance also provides a variety of other cryptocurrency financial solutions that allow users to lend, borrow, and generate passive income. Using a CeFi (centralized finance) option can be considerably simpler if you don’t want to access DApps and handle a DeFi wallet yourself. Simple crypto-collateral loans are available through Binance for a variety of tokens and coins, including Bitcoin (BTC), ETH, and BNB. Users of Binance who want to earn interest on their HODLed cryptocurrency provide the money for these loans.
Platforms for crypto lending can benefit both lenders and borrowers when used wisely. Investors can now maximize their capital by using it as collateral, giving HODLers another way to generate passive income.