In an industry with plenty of fast ascents and precipitous falls, many wondered whether the platform had the staying power to remain a central institution in DeFi lending.
Nearly 2 years later, Aave is still going strong, especially in relation to its one-time close rival.
This article will take a closer look at the two platform’s strengths and weaknesses and explain why Aave was able to overtake Compound.
Aave and Compound TVL Compared
As of Oct. 20, the DeFi market has surpassed $200 billion in total locked-in value (TVL) at $241.575 billion, with Aave’s TVL gaining the largest share at $18.89 billion. This is followed by lending protocols Curve ($18.01 billion), MakerDAO ($16.4 billion) and Compound ($12 billion).
In the lending space, Aave’s TVL has been way ahead of Compound in the last six months. This can be attributed to its model, which is similar to traditional finance, and its ability to operate in Financial Conduct Authority-encrypted assets.
Comparison of Market Cap
As of Oct. 20, Aave continues to dwarf Compound in the DeFi lending and borrowing industry with a market cap of over US$4 billion versus the latter’s $1.97 billion.
There are two other metrics that indicate Aave’s strong position in the future.
First, its circulating supply of 82% is higher than Compound’s 61%, indicating less inflationary pressure.
Second, Aave has not had any major security incidents, indicating better security mechanisms likely favored by depositors.
Aave’s deposit volumes dominate
Aave’s deposit volume of approximately $21 billion has remained higher than Compound’s estimated $18 billion. Compound previously went live with subsidized lending and mining (disguisedly raised deposit returns and lowered lending rates to compete with Aave). Today, Aave has turned to lending and mining, coupled with Polygon’s deposit and lending subsidies. Compound’s rate advantage has largely disappeared as a side-effect of Aave’s ecosystem bargaining power.
The Aave team continues to focus on innovation while being highly risk-aware, and adjusts the direction of the product in a timely manner when issues arise, making the platform more secure.
Can Aave users lend out more assets than Compound?
Data for the previous month shows that Aave’s borrowing balance has leveled off above $8.2 billion per day, which is still higher than Compound’s borrowing balance of $5-7 billion, with little overall volatility.
Aave supports a wider variety of tokens, allowing users to lend out more assets and have more liquidity available. Some of Aave’s rate agreements are also…
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