LD Capital: Aave short-term funding analysis
1. Project Introduction
Aave is the leader in lending on Ethereum and is currently deployed on 9 chains including Polygon, Arbitrum, and Optimism. The project was founded in 2017. The initial version was peer-to-peer lending. It was later revised due to the inefficiency of loan matching and drew on the Compound fund pool lending model to provide high liquidity. Aave is currently in its V3 version, which is designed to provide higher capital efficiency, higher security and cross-chain lending functions.
Higher capital efficiency refers to the high-efficiency mode (eMode), which classifies assets and sets risk parameters according to asset types. When the borrowers collateral and the loaned assets are in the same category, a higher borrowing limit can be obtained.
Higher security refers to the isolation mode, that is, new lending assets through on-chain voting will first enter the isolation mode. Assets under this model will have a debt ceiling, and when the asset is used as collateral, only permitted stablecoins are allowed to be lent. The purpose is to allow more long-tail assets to be listed on the protocol while ensuring the security of the protocol. .
The above two functions are currently available on V3, and the cross-chain lending (Portal) function has reached a deployable state as early as March 2022 when the V3 version was launched. However, due to security considerations, the team has not launched this function. It is more cautious and has not been officially deployed yet. Because Aaves cross-chain lending is not controlled by the Aave protocol itself, but a third-party cross-chain bridge protocol is introduced.
2. Business data
1) Loan
According to data from defillama, Aave’s current TVL has reached US$4.672 billion, making it the leader in the lending sector. Aave supported a wider variety of altcoins in the early stages of development, but later froze some tokens due to potential risks. Currently, Ethereum V3 supports about 20 types of tokens, which is comparable to the types of tokens supported by Compound V2, and the fund utilization efficiency of stablecoins and altcoins is higher than that of Compound. Moreover, Aave early supported Ethereum derivative tokens such as stETH.
The reason why Aave has developed rapidly in its lending business is, on the one hand, its radical business expansion strategy, and on the other hand, its early deployment of multiple chains. Aave has entered chains such as Polygon as early as 2021, and is basically in the top position on other chains, thus grabbing more market share. However, Ethereum remains the leading place for borrowing and lending.
2) Stablecoin
Aaves stablecoin GHO was launched on July 15 this year. The 1.5% borrowing rate makes it more competitive than other stablecoins, and it provides AAVE pledgers with a 30% interest rate discount. All GHO interest income will be owned by the treasury. The initial loan limit is 100 million, and the current loaned assets are 23.37 million, occupying a very small market share in the stablecoin sector.
3）RWA
Aave is the second DeFi protocol to introduce RWA assets after Maker. In cooperation with Centrifuge Tinlake, the RWA market and the Aave lending market operate independently. The current funding size is about $7.1 million, which is nowhere near Maker’s $2.3 billion. Currently, only the USDC market can provide deposit and borrow APY, and other markets no longer provide it. Users who successfully pass KYC only need to deposit USDC in the USDC market, and can obtain a basic annualized return of 1.64% and 3.23% wCFG liquidity. Mining yield.
3. Position data on the chain
The total number of Aave tokens is 16 million, and its main uses are staking and governance. The Aave protocol has a built-in safety module (SM, Safety Module) component, in which token holders can pledge funds in order to cover when there is a debt gap in the Aave protocol. In return, stakers receive AAVE token incentives as well as a share of protocol revenue.
As can be seen from the staking interface of the official website, the current daily emission volume of AAVE tokens is 1,100, which is worth approximately US$695,000 based on Coingecko’s current price of $63.2. The current circulation of AAVE tokens reaches 90.88%, and the 24-hour trading volume reaches 120 million US dollars.
The top 30 AAVE addresses account for 70.68% of the token holdings, and the exchanges account for 14.64%, of which Binance accounts for 11.06%. Binance is the most liquid trading place for AAVE, and the large address holdings account for 7.23%. Institutions The position ratio is 2.09%, and the main positions are Blockchain Capital and Jump Trading. The balance of large addresses has changed little in the past 30 days.
Judging from the position building status of addresses on the chain in the past 30 days, the position building behavior is not obvious. A relatively big anomaly is that AAVE pledger @luggisdoeth redeemed 100,000 tokens from Aave V2 on August 22, worth approximately US$6.38 million. This part of the token is still in the wallet and has not been moved. It is sustainable. Pay attention to the movements of this address.
Judging from the interactions on the Aave contract chain in the past six months, the peak period of activity was from June 25 to July 18. During this period, the RWA concept craze caused by the creation of the new RWA project by the founder of Compound drove the AAVE token price to recover in the same period. , the token price reached a maximum of $81.
Judging from the price trend of Aave, it is currently at the bottom of the price range.
Summary: Aave is a leading on-chain lending project, and its business is developing steadily. In the past 30 days, there has been no obvious position building behavior on the chain. There are large addresses that have unstaking actions, and it is currently at the bottom of the price range.
