DeFi on Polygon heating up
Decentralized finance liquidity protocol Aave is currently receiving a lot of attention after launching on Ethereum sidechain Polygon. The switch has enabled them to offer their current services, but without the gas fees.
In the last 7 days, the number of transactions on Aave has jumped by over 50% up to 21,000 while the number of unique active wallets interacting with the dapps smart contracts has increased almost 20% to 2.8k. Transaction volume is down slightly after a successful launch last week, but they still recorded $256 million.
Decentralized finance apps are flourishing on Polygon right now. Mainly in part due to increased awareness of cheaper alternatives to Ethereum and a new thirst in the cryptocurrency sector. As previously reported, QuickSwap is another decentralized finance app providing token swaps powered by Polygons layer-2 scalability infrastructure.
Arguably, at this moment in time, Aave and QuickSwap are leading Polygons’ entry into DeFi with both generating an impressive number of users and value in their short life span. With 58 dapps in total tracked by DappRadar, 15 of which sit in the finance dapp category and 10 in the NFT and collectibles category, the intentions are clear. It will be fascinating to see how the Polygon Network’s DeFi ecosystem develops in the near future.
What is Aave?
At its core, Aave allows the creation of lending pools that enable users to lend or borrow different cryptocurrencies. Users deposit funds they wish to lend, which are then collected into a pool. Borrowers may then draw from those pools when they take out a loan. These tokens can be traded or transferred as a lender wishes. A borrower may provide collateral in DAI, for example, and borrow in ETH. Allowing exposure to different cryptocurrencies without owning them outright.
To facilitate this activity, Aave issues two types of tokens: aTokens, issued to lenders so they can collect interest on deposits, and Aave tokens, which are the native token of Aave. The Aave token offers holders several advantages such as discounts or no fees at all when they take out loans using the Aave token.