I stupidly borrowed $7,000 for projects, it's tough, because I don't have that money now 🥲
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When users deposit assets into one of Aave's liquidity pools, aTokens (e.g. aETH) are created for them. aTokens must be claimed. They have the same value as the collateral deposited. aTokens earn interest in real time. These tokens can be exchanged for the underlying asset (collateral) at any time. They also entitle holders to a portion of the fees earned from flash loans.
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So how does Aave maintain liquidity in the system? Not all loans require overcollateralization, except for flash loans, which typically last only a few seconds. It automatically liquidates the collateral of borrowers who cannot maintain the loan-to-value (LTV) ratio to pay off some of the debt and restore liquidity. LTV determines the maximum amount that can be borrowed with a given amount of collateral. I wonder what Aave's LTV is? 75%
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