What is Aave?

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Aave is a decentralized lending and borrowing protocol initially launched on Ethereum network in 2021, and recently expanding itself on other L1 and L2 blockchains like Avalanche, Polygon, Optimism, etc.

Aave provide non-custodial services, meaning that your assets are not in the hands of some authority or centralized entity, but rather is deposited in a smart contract which has certain constant functions that can be excercised any moment.

You basically deposit a token as collateral and are able to borrow other tokens against it up to certain percentage.

What are we going to achieve here?

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AAVE is the governance token of Aave protocol, but aside from governance it has some other use cases. For example, AAVE can be deposited as collateral to borrow against, or it can be staked and provide additional margin for your borrowing position much like of an insurance contract. So, we want to see:

• How many users deposited or withdrawn how much AAVE token as collateral.
• How many users staked or redeemed how much AAVE token.
• Comparing AAVE performance on V2 and V3 versions on different chains.

Some Methodological Notes

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I am using FlipsideCrypto database to query information for this analysis which is provided as part of MetricsDAO Bounty Program.

I only considered V2 and V3 contracts. V2 version has exclusive tables on flipside but to be more accurate iI used Ethereum Core tables; Also, to extract V3 information I used specific tables for each network and put them together.

I chose the past year as the time boundary for V2 information, so whenever you take a look at this dashboard, you are seeing 1 year performance of Aave V2. So make sure you bookmark it if you need these stats.

But V3 information starts from May 15th, 2022. So this should be considered when comparing to Ethereum V2.

Data & Analysis

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Let’s start with some basic information regarding distinct number of depositors and withdrawers in addition to their total deposited and withdrawn amount.

In total, There were more people withdrawing their AAVE collateral but the withdrawn amount is lower than the deposit amount (which has lower depositors); This suggests that average withdraw amount is lower than average deposit amount, and in the past year there wasn’t enough incentive to withdraw AAVE which makes sense since the price is declining.

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Breaking down these information in Daily basis would better serve our purpose:

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• Some of highest deposits were after or in midst of crash in price when possibility of liquidation is high. The most deposited day was June 21st, 2020, after recent market crash and on lowest AAVE price levels.
• Top withdraws are either on the highest prices or after making sure the position is not in risk of liquidation after crash.
• If you take a closer look at days before a high withdraw (drag your mouse on a specific area to zoom-in), You can see a pattern in which people are starting to withdraw on a increasing pattern. Usually the most patient ones get more rewarded, since they are waiting for higher prices to withdraw and sell their AAVE
• The Second chart shows the subtraction of Deposited and Withdrawn USD amount in each day in past 365 days. Again, the highest spike belongs to the most recent market crash which lead to more AAVE deposit as collateral to stop liquidations.

Next two charts are speaking for themselves, I only want to bold two moments in Cumulative amount chart:

1. In past 365 days, cumulative withdrawn amount was always higher than deposits, but this has changed since July 20th with a huge leap.
2. Up until Dec 22nd, 2021, the number of distinct Withdrawers were growing and getting closer to distinct depositors, But since then the difference is growing larger everyday.

This is even more obvious is next chart which shows the AAVE amount as collateral. this can be start of a uptrend in AAVE price since there hasn’t been this much AAVE as collateral eve

V3 Comparison

Flipside Database only provides data from 4 of Supported chains of Aave V3 Contract, which are Polygon, Optimism, Avalanche, and Arbitrum.

• Polygon is the most popular V3 network to deposit AAVE token and borrow against.
• while polygon has ~60% of number of transactions, it has more than 75% of the amount deposited, which suggests that Polygon users are more comfortable with large deposits compared to other chains.
• It should be noticed that Optimism took the second place only after Aave announced its OP distribution plan a few days back and this is shown in Figure 7.
• If it wasn’t for this incentive, Polygon dominance would be much more and optimism probably would secure the last place in every criterion. As you see in Figure 8, Optimism is barely present in data without the deposits after Aug 4th.

Staking AAVE

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Last But not the least, We want to take a look at Staking contract of Aave protocol for Aave token.

one again, charts are speaking for themselves, I only mention this fact that since I am querying the past 365 days, some data might seem strange for you.

For example, The amount of Aave redeemed is greater than amount deposited, which is only true for our time period.

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What is the benefit of Staking AAVE?

We read on staking page:

> AAVE holders can stake their AAVE in the Safety Module to add more security to the protocol and earn Safety Incentives. In the case of a shortfall event, up to 30% of your stake can be slashed to cover the deficit, providing an additional layer of protection for the protocol.

Adding the APY to this, would make it more juicy

Takeaways:

• Unlike Staking contract, V2 has more deposits and less withdrawals in past 365 days, while Unstaking amounts have been more than Staking amounts of AAVE.
• Top Deposits usually happen at times of market crash.
• Price uptrend generated increasing gradual patterns in withdrawals.
• The amount of AAVE as collateral is at its ATH.
• Polygon is the most popular V3 Network in all stats.
• Optimism recently experienced a sudden peak after OP incentive announcement.