Aave’s avenue to over $11 billion in TVL

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Although Aave was launched in the beginning of 2020, it has experienced significant growth in total deposits and daily deposits since the summer of 2020. Overall, Aave has totalled over $45 billion in deposits, with 2021 seeing the protocol average $231 million in deposits per day. More than 46,000 unique Ethereum users have become lenders on Aave, with the average all-time deposit reaching $173,000.

Aave’s recent launch on Polygon and the introduction of its liquidity program was followed by a rapid increase in total value locked from $5.4 billion on April 25 to roughly $11.4 billion on May 12, according to Dapp Radar data. So, here is a look at the previous usage of the protocol. 

Aave’s avenue to over $11 billion in TVL

Notably, the average deposit is significantly greater than the median, which is only $3,500. Comparing these numbers gives insight into the portrait of Aave users: There is a significant share of retail lenders on Aave. 

However, imagine if Elon Musk walking into a room made every person in that room a billionaire, on average. Something comparable happens when whales who hold millions at their addresses move the average away from the median on Aave. Nevertheless, the presence of whales in DeFi is hardly surprising for anyone.

Borrowing on Aave appears to be very volatile, with some days initiating less than $10 million in loans and others more than $400 million. The average through 2021 has been $58 million per day. There have been roughly 15,000 unique Ethereum borrowers on Aave with a total of 117,000 borrow events logged on the Ethereum blockchain, highlighting the fact that borrowing may be less in demand among Aave users.

The breakdown of the most liquidated assets could help reveal the source of Aave’s new liquidity mining program. The majority of the most liquidated assets, including Wrapped Ether (WETH), Ether (ETH), LINK and Wrapped Bitcoin (WBTC), are volatile, which makes them more prone to liquidations. 

Aave’s avenue to over $11 billion in TVL

The recently launched liquidity mining program will increase deposit annual percentage yield for many different digital assets, including USD Coin (USDC), ETH and WBTC, which should help Aave catch up with its major competitor, Compound.

However, the program rewards are allocated to lenders and borrowers differently depending on the underlying asset, since Aave is looking for means to help users decrease the risk of liquidation.

To incentivize usage of stablecoins, Aave distributes rewards to stablecoin lenders and borrowers equally. For riskier assets, such as WBTC and ETH, borrowers receive only 5% of the rewards. This two-sided approach is designed to help Aave eliminate risky borrowing. 

Notably, LINK, one of the most popular assets on Aave, was not included in the liquidity mining program at all, which incurred feedback from the Aave community:

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