Let’s take a look at the old leading projects today.
The price of AAVE coin has soared from more than 80 US dollars at the beginning of the year to 378. It is currently ranked 28th in market value, an increase of nearly 5 times. The return ratio is very high. Let us see why it is the leader!
Introduction
Aave is a decentralized lending platform. Launched in January 2020, it allows users to lend, borrow crypto assets, and earn interest, all without the need for a centralized intermediary. When users lend through the platform, they earn interest. When they borrow, they pay interest.
Aave runs on the Ethereum, Polygon, and Avalanche blockchains and operates as a smart contract system that enables assets to be managed by a distributed network of computers running the Aave software.
Practical application of the project
The Aave platform is used for lending and borrowing. Thus, investors can deposit their stablecoins into the platform to earn interest at a more attractive rate of return than traditional savings accounts. Similarly, borrowers can take out loans with the collateral they deposit.
The Aave platform also allows for “flash loans.” Flash loans are loans that are borrowed and repaid within the same block. These are specific types of loans that are issued and settled almost instantly. These loans require no upfront collateral.
Borrowers can request funds from Aave, but they must repay those funds plus a small fee within the same block. On the Ethereum network, this is within 13 seconds. If the borrower does not do this, the entire transaction is canceled, so no funds were ever borrowed.
Additionally, there are several advantages to using the AAVE token on the blockchain. This includes discounted transaction fees for users who submit AAVE as collateral, and no fees for users who borrow AAVE. AAVE holders are also entitled to certain governance rights, depending on the amount of AAVE held.
Project Background
There are still many well-known funds in the investment background, and the project has become the industry leader, so the future is bright!
Track analysis and competition status
Aave's moat mainly consists of the following four aspects:
Good record of protocol security management: Most emerging lending protocols will encounter security incidents within the first year of operation, while Aave has not had any major smart contract-level security incidents so far. For DeFi users, especially large users with a lot of funds, a platform's security record brought by robust risk management is usually the primary consideration when choosing a lending platform.
Two-way network effect: DeFi lending is a typical two-sided market, with depositors and borrowers constituting the supply and demand sides respectively. The growth of one side will stimulate the growth of the other side, making it increasingly difficult for latecomers to catch up. In addition, the more abundant the overall liquidity of the platform, the smoother the liquidity in and out of depositors and borrowers, which makes the platform more attractive to large capital users, further promoting the growth of the platform business.
Excellent DAO Management: Aave Protocol has fully implemented DAO-based management. Compared with the centralized team management model, DAO management provides more comprehensive information disclosure and has more in-depth community discussions on important decisions. In addition, Aave's DAO community includes a group of professional institutions with high governance levels, including top risk management service providers, market makers, third-party development teams, and financial advisory teams. These diverse sources of participants promote active governance participation.
Multi-chain ecosystem positioning: Aave is deployed on almost all major EVM L1/L2 chains, and its TVL (total locked value) is in a leading position on all deployed chains except BNB Chain. In the upcoming Aave V4 version, cross-chain liquidity will be connected, making the advantages of cross-chain liquidity more prominent.
Moreover, AAVE’s TVL is the leading blockchain and ranks second in the Ethereum ecosystem.
Moreover, AAVE is about to launch version 4:
Aave V4 will further enhance its capabilities and put the protocol on the path to introduce DeFi to the next billion users. First, Aave will focus on revolutionizing the experience of users interacting with DeFi by building a unified liquidity layer. Aave will eliminate the complexity of cross-chain lending by enabling seamless access to liquidity on multiple networks (including EVM and future non-EVM networks). The unified liquidity layer will also rely on account abstraction and smart accounts to enable users to manage multiple positions across isolated assets.
AAVE Token Economic Model
The AAVE coin provides holders with discounted fees on the platform, and it also serves as a governance token — giving owners a say in the future development of the protocol.
Total supply: 16 million
The unlocking is basically done, let’s take a look at the data of big users.
The data of large investors is also very impressive. Many whales are constantly increasing their positions, and there is no obvious selling action!
Summarize
The lending market in DeFi is still small, but is likely to experience significant growth in the coming years, especially as more institutional players gradually enter the market. With its strong brand credibility and leading position, Aave is well-positioned to absorb this new influx of funds and is expected to expand horizontally into more new markets (such as Solana).
I also believe that Aave will continue to dominate market share with its strong network effects, thanks to the liquidity and composability of its tokens. The upcoming token economic model upgrade will further improve the security of the protocol and enhance its ability to capture value.
Additionally, by comparing the “Market Cap/TVL” ratio, it can be seen that despite AAVE’s recent significant growth, its price is still undervalued.
The embodiment of value coins is often in practical applications. I believe that the Defi market will get better and better, and Aave will lead the Defi market to new heights. The current price has reached half of the last bull market, but the last bull market did not unlock much, but there is no need to be afraid, because Aave has basically unlocked it, just wait for market makers to hype it up. There are many callbacks in the bull market, and for value coins like this, callbacks are both positions. I believe Aave still has at least 2-5 times of room.
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