Many people think decentralized lending is simple, but this is the key point:
When a position’s health factor on Aave falls below 1, liquidators can liquidate it.
Decentralized lending has no credit checks. Borrowers are simply anonymous addresses, so the protocol can only control the risk of bad debt by requiring collateral to be worth more than the loan.
Borrowing rates are variable. When pool utilization approaches its limit, rates may rise significantly, so be sure to factor in this cost when borrowing long term.
Holders of $AAVE can vote on proposals such as Aave’s risk parameters.
#AAVE
When a position’s health factor on Aave falls below 1, liquidators can liquidate it.
Decentralized lending has no credit checks. Borrowers are simply anonymous addresses, so the protocol can only control the risk of bad debt by requiring collateral to be worth more than the loan.
Borrowing rates are variable. When pool utilization approaches its limit, rates may rise significantly, so be sure to factor in this cost when borrowing long term.
Holders of $AAVE can vote on proposals such as Aave’s risk parameters.
#AAVE