aToken (Aave)

aToken is a tokenized representation of assets deposited in the Aave protocol, a DeFi platform that enables cryptocurrency lending and borrowing. When a user deposits an asset into Aave, such as Ethereum (ETH) or DAI, they receive aTokens equivalent to the deposited value. These aTokens represent the user's stake in Aave's liquidity pool and accrue continuous interest in real-time.

For example, if a user deposits 10 Ethereum into Aave, they will receive 10 aETH (aTokens for Ethereum) in return. As long as the funds remain in the protocol, the aTokens generate continuous interest that is compounded instantly, meaning the user's aETH balance increases over time.

aTokens are unique because they allow users to earn interest while retaining the flexibility to trade, transfer, or utilize their underlying assets on other DeFi platforms. Additionally, aTokens can be used as collateral to borrow additional funds within the Aave protocol, providing users with the ability to leverage their assets efficiently for additional benefits.