Aave is a decentralized lending system that allows users to lend, borrow and earn interest on crypto assets, without any intervention of middlemen. So, Aave is a system of smart contracts that enables these assets to be managed by a distributed network of computers running its own software.

Aave users do not need to trust a particular institution or person to manage their funds, instead should trust that its code which will be executed as expected.

Aave borrowers must post collateral before they can borrow, so that they can only borrow up to the value of the collateral posted. Borrowers receive funds in the form of a special token known as an aToken, which is pegged to the value of another asset. This token is then encoded so lenders receive interest on deposits.

Users deposit digital assets into "liquidity pools" on Aave, which become funds that the protocol can lend out and below graph shows the Total net deposits of digital assets on Aave in the past 6 months.

Aave provides liquidity in the form of short term loans with stable return on capital and relatively low risk. So, Aave holders will always ensure collateralized liquidity and do vote on platform management, which is governed in a decentralized manner.

The below graph provides us the average Liquidity percentage on Aave over the past 6 months and its been predominantly raised in the last week of October 2021.