Analysis

    • AAVE v2 is the current dominant market with nearly ~19B TVL
    • After AAVE v2 launch in December 2020, it took only 3 months to overtake AAVE v1s TVL.
    • After this crossover point in February 2021, AAVE v1 TVL has been in decline although it 3x'd recently between August 17-20 '21.
    • After an initial tick up to 300M TVL, AAVE AMM TVL has decreased to 50M
    • The biggest jump in AAVE v2's TVL can be observed between April 24 and May 5. It's an almost vertical increase representing 4x growth in a short amount of time. This was due to passing of the AIP 16 governance proposal which introduced liquidity mining to AAVE. After this change, liquidity providers and borrowers in Aave’s USDC, DAI, USDT, GUSD, ETH, and WBTC pools earned stAAVE rewards in addition to their standard interest yield.
    • Since July 14th, AAVE v2's TVL has again started increasing and almost 2x'd in a month.

    What is AAVE?

    Aave is a decentralized money market running on the Ethereum blockchain that enables users to lend and borrow a range of crypto assets. Aave distinguishes itself by the range of cryptocurrencies in which users can take out loans, and by letting lenders earn passive income on the funds they make available for borrowers.

    Running on the Ethereum blockchain, Aave is a system of smart contracts that enables these assets to be managed by a distributed network of computers running its software.

    This means Aave users do not need to trust a particular institution or person to manage their funds. They need only trust that its code will execute as written.

    At its core, the Aave software enables the creation of lending pools that enable users to lend or borrow 17 different cryptocurrencies including ETH, BAT and MANA.

    Like other decentralized lending systems on Ethereum, Aave borrowers must post collateral before they can borrow. Further, they can only borrow up to the value of the collateral they post.

    Borrowers receive funds in the form of a special token known as an aToken, which is pegged to the value of another asset. This token is then encoded so lenders receive interest on deposits

    A borrower may post collateral in DAI, for example, and borrow in ETH. This allows a borrower to gain exposure to different cryptocurrencies without owning them outright.

    Aave also introduce additional features, such as instant loans, and other forms of issuing debt and credit that take advantage of the unique design properties of blockchains.

    Uses

    Aave was designed to act as a completely secure and decentralized ecosystem of borrowers and lenders, offering access to users all over the world and allowing lenders to earn passive interest income on assets they contribute to the liquidity pool.

    Beyond its native defi purpose, Aave is open source which expands its functionality by enabling the development of a variety of third party applications on the Ethereum network. To date, Aave has partnered with a number of developers, including:

    Axie Infinity: Aave has partnered with the Ethereum-based game known as ‘Axie Infinity’ that allows players to win Aave tokens through skilful gameplay. Aave has also developed an Aave NFT for the game in the form of a unique character.

    Pixelcraft Studios: Aave has invested in the Singaporean Pixelcraft Studios for the development of Aavegotchi, a game that allows players to collect Tamagotchi-style NFTs powered by the Aave protocol.

    Balancer: Aave has partnered with Balancer to develop the Balancer V2 Asset Manager. The app will allow unused assets in the Balancer liquidity pools to earn interest on the Aave network. The Asset Manager will serve as a bridge that facilitates transfers between the networks.

    AAVE Versions

    AAVE v2 was launched in December 2020 and made various optimizations to the protocol including:

    • Yield & Collateral swap
    • Upgraded Flash Loans
    • Repayment with collateral
    • Flash liquidations
    • Batch Flash Loans
    • Debt Tokenization
    • Native Credit Delegation
    • Gas Optimisations
    • Stable & Variable Rate Borrowing

    AAVE Automated Market Maker (AMM) market was released in March 2021. This enabled Uniswap and Balancer users to deposit their LP tokens as collateral in the Aave protocol.

    Loading...