Aave’s marketplace surpasses $5bn in liquidity

Aave said its marketplace surpassed $5bn (£3.6bn) of liquidity during February.

The cryptocurrency-backed peer-to-peer lending platform saw over a billion dollars in outstanding loans and a high volume of flash loans last month. These are uncollateralised loans that allow for the borrowing of an asset, as long as the borrowed amount and a fee can be returned before the end of the transaction.

The Ethereum-based lending platform said the volume of these flash loans reached $2.2bn in February, generating nearly $2m in fees.

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“The Aave Protocol continues to grow, surpassing $5bn of liquidity during the month of February,” Aave said in a blog on its website.

“There has been good utilisation, with outstanding loans surpassing the billion, now at $1.2bn, with nearly $6m of interest revenue this month.”

In December, Aave launched version 2 (V2) of its marketplace, replacing the previous version which was launched at the beginning of 2020.

The Aave Protocol V2 allows users to trade their deposited assets across all currencies supported in Aave’s marketplace, even when they are being used as collateral. Aave has previously said that this collateral swapping can be a useful tool to avoid liquidations.

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In January, the platform made its migration tool available for users to move their loans from the old marketplace to the new one.

During the same month, Aave introduced greater incentives for investors that are willing to take higher risks.

The platform voted in and implemented a new improvement proposal, AIP-7, which gives investors a greater reward in exchange for introducing additional risk for their funds put into the safety module.