Total Liquidity Dashboard

    Analyzing the daily total liquidity present in Aave.

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    Introduction

    Aave relies on liquidity pools to run its lending, borrowing, AMM, and flashloan protocols respectively. The liquidity of the pools refers to the value of assets available and capable of serving network needs.

    This dashboard takes a look at the total liquidity of the Aave platform and investigates which assets are dominating.

    Method

    Our investigation shall be broken down into a series of visualization for a better understanding of how Aave liquidity is distributed across the ecosystem.

    First, let's look at the high level running total liquidity by day.

    Findings & Conclusion

    While there are many other ways such as trade volume and lending APY to determine dominance in the Aave ecosystem, we found utility to be a more interesting criterion.

    The dominating assets are those with the highest utility rate, and these are:

    1. USDC
    2. DAI
    3. USDT
    4. WETH
    5. TUSD

    There's been a steady increase in Aave's total liquidity since genesis. The all-time high (ATH) sits at the peak 547.3B USD, which happened on September 6, 2021. Now, let's break down this large figure into the various Aave versions. Currently, there are three versions of Aave, namely; v1, v2, and AMM.

    Aave v2 leads the pack with the largest liquidity ahead of its predecessor, v1. Aave AMM takes the 3rd spot, which is Aave's decentralized exchange running automated market makers.

    Next, let's dive deep into more granular details about how much liquidity the reserves hold. This is of interest to the investigation because it will be key to determining which assets dominate the Aave ecosystem.

    In no particular order, the top 5 Aave assets from the graph above are; USDC, WETH, WBTC, DAI, and USDT.

    Out of these 5 assets, 3 are stablecoins, which implies that stablecoins have liquidity in the Aave ecosystem.

    Once we have liquidity, we can determine dominance. There are many ways to determine which assets in the ecosystem are dominant and these include; Trading volume, Lending APY, and Total liquidity.

    However, we think the most interesting way to define dominance is by Utilization. An asset may have large liquidity but may be rarely utilized, therefore utilization is an important factor in determining the dominance of an asset.

    Per the scope of the investigation, Utilization = Dominance, which is calculated using the formula liquidity * utilization rate.

    Let's take a look at a sample dominance graph of the Aave ecosystem.

    With the introduction of the utilization rate variable, we see a totally different graph. One notable change is that other stablecoins like TUSD, SUSD, and GUSD have climbed up the ladder in confirmation of our earlier theory that stablecoins are of utility on the Aave platform.

    Now let's crown the king. Which asset is the king of Aave?

    King of Aave = USDC