The banks ridiculed – An avalanche of $1.7 billion in collateral-free loans… thanks to cryptomoney!
A concept that was quickly adopted – invented and deployed just over a year ago, Aave’s flash loans continue to break records. Indeed, by the year 2020, the protocol has distributed the equivalent of $1.7 billion in instant loans.
The unstoppable rise of Aave
Offering loan and savings services, Aave has been able to differentiate itself from the competition from the outset by introducing flash loans, which are instant Profit Revolution loans with a lifetime equivalent to a transaction. In practice, funds are borrowed at the beginning of a transaction, used within the transaction, and then repaid before it is completed.
This type of loan is extremely interesting in the context of arbitration or loan liquidation. Unfortunately, flash loans have also been frequently used by various DeFi protocol hackers.
Everybody is fighting for flash loans
In 2020, following the boom in DeFi and yield farming, Aave’s flash loans have been heavily solicited. The decentralised lender made possible the equivalent of 1.7 billion dollars in flash loans.
Change in the cumulative amount of Aave’s flash loans in 2020 – Source: Aavewatch
Although the latter had a timid start, with $25 million borrowed in the first quarter, things subsequently accelerated. In the end, Aave recorded $500 million in flash loans in the second quarter, and almost $1 billion for the rest of 2020.
It is likely that the flash loan craze will continue to grow in 2021, especially if the bull market continues. Let’s also hope that hackers won’t be the talk of the town!