In an trade with loads of quick ascents and precipitous falls, many puzzled whether or not the platform had the endurance to stay a central establishment in DeFi lending.
Almost 2 years later, Aave remains to be going sturdy, particularly in relation to its one-time shut rival.
This text will take a more in-depth have a look at the 2 platform’s strengths and weaknesses and clarify why Aave was in a position to overtake Compound.
Aave and Compound TVL In contrast
TVL (since January 2021) (Supply: Footprint Analytics)
As of Oct. 20, the DeFi market has surpassed $200 billion in whole locked-in worth (TVL) at $241.575 billion, with Aave’s TVL gaining the most important share at $18.89 billion. That is adopted by lending protocols Curve ($18.01 billion), MakerDAO ($16.4 billion) and Compound ($12 billion).
Newest adjustments to the rating of the highest 10 TVL platforms (Supply: Footprint Analytics)
Within the lending house, Aave’s TVL has been manner forward of Compound within the final six months. This may be attributed to its mannequin, which is analogous to conventional finance, and its skill to function in Monetary Conduct Authority-encrypted belongings.
Comparability of Market Cap
As of Oct. 20, Aave continues to dwarf Compound within the DeFi lending and borrowing trade with a market cap of over US$4 billion versus the latter’s $1.97 billion.
There are two different metrics that point out Aave’s sturdy place sooner or later.
Aave VS Compound Market Cap (since January 2021) (Supply: Footprint Analytics)
First, its circulating provide of 82% is greater than Compound’s 61%, indicating much less inflationary strain.
Second, Aave has not had any main safety incidents, indicating higher safety mechanisms possible favored by depositors.
Aave’s deposit volumes dominate
Aave’s deposit quantity of roughly $21 billion has remained greater than Compound’s estimated $18 billion. Compound beforehand went reside with backed lending and mining (disguisedly raised deposit returns and lowered lending charges to compete with Aave). At present, Aave has turned to lending and mining, coupled with Polygon’s deposit and lending subsidies. Compound’s charge benefit has largely disappeared as a side-effect of Aave’s ecosystem bargaining energy.
Aave VS Compound Deposited Stability (since September 2021) (Supply: Footprint Analytics)
The Aave crew continues to give attention to innovation whereas being extremely risk-aware, and adjusts the route of the product in a well timed method when points come up, making the platform safer.
Can Aave customers lend out extra belongings than Compound?
Knowledge for the earlier month reveals that Aave’s borrowing stability has leveled off above $8.2 billion per day, which remains to be greater than Compound’s borrowing stability of $5-7 billion, with little total volatility.
Aave vs Compound Borrowed Stability (since September 2021) (Supply: Footprint Analytics)
Aave helps a greater variety of tokens, permitting customers to lend out extra belongings and have extra liquidity accessible. A few of Aave’s charge agreements are additionally thought-about extra progressive and have some benefits over Compound, similar to unsecured flash loans, charge swaps and line of credit score mandates. However on the draw back, it comes with comparatively excessive lending charges and mortgage charges.
Aave’s newest asset liquidity distribution (Supply: Footprint Analytics)Compound’s newest asset liquidity distribution (Supply: Footprint Analytics)
Aave and Compound assist a wide range of cryptocurrencies, together with stablecoins similar to DAI, USDC and USDT, and non-stablecoins similar to WBTC and UNI. With Aave, customers primarily pledge ETH to lend USDC, DAI and USDT. With Compound, customers pledge ETH to lend DAI and USDC. Whereas the availability of DAI and USDC is about the identical, the previous has extra demand than the latter.
It’s also price noting that Aave is likely one of the few licensed tasks and is freely convertible in the UK.
Variations in liquidation
There are at present two conventional liquidation strategies: the public sale format of MakerDao and the liquidation technique of Aave and Compound, which function on a first-come, first-served foundation.
Compound units a liquidation line of 75% in addition to a borrowing charge that triggers liquidation when 100% is reached. Nonetheless, solely 50% of its belongings shall be liquidated.
Aave, however, has a 5% security cushion, mitigates threat, particularly for brand spanking new customers.
In abstract, Aave continues its dominance over Compound, primarily as a consequence of the next factors:
- Aave has been extra aggressive in innovation and enterprise enlargement, having extra kinds of tokens launched on its platform and gaining relative traction on unsecured flash lending, automated market makers, line of credit score mandates, and with the normal finance trade.
- On 19 October 2021, Aave TVL hit an all-time excessive that was made attainable by the crew behind the corporate whose focus is on security, threat administration and product technique.
- Aave has progressed a lot quicker by way of compliance to mitigate threat.
The above content material is just a private view, for reference and knowledge solely, and doesn’t represent funding recommendation. If there are apparent errors in understanding or knowledge, suggestions is welcome.
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