Aave is a decentralized lending protocol that allows people to lend and/or borrow crypto assets. It allows users to deposit certain tokens into liquidity pools that they can borrow from. Lenders then earn interest and rewards from the assets they deposit.
aToken is an interest-bearing token minted and burnt upon supply and withdrawal of assets on Aave market. It denotes the amount of crypto assets supplied and the yield earned on those assets. For example, when you deposit Dai, you will receive a certain amount of aDai from AAVE. When you redeem it, these aDai will be disposed correspondingly.
AAVE is the governance token for the Aave protocol. It is used to vote and decide on community proposals.
Your yield basically includes two parts: 1. Interests paid by the borrowers 2. Reward tokens distributed by the third party, such as AVAX and OP Normally, a higher asset utilization rate can lead to a higher lending APY. Those rewards from the third party are variable for each token based on community governance.
Here's one main risk Aave may have: Contract risk: Aave smart contracts could be hacked, or bugs in contracts could be exploited. In such cases, your assets may be lost.