Aave Becomes Second DeFi Project to Overtake MakerDAO for Most Crypto Deposited

Decentralized finance (DeFi) credit market Aave has pulled ahead of stablecoin mint MakerDAO for the title of most collateral staked on Ethereum, according to DeFi Pulse.

Aave now has $1.47 billion-worth of different crypto assets staked for credit lines, while MakerDAO has $1.45 billion in total value locked (TVL). 

“Reaching the highest TVL was possible due to the wide range of developers building on top of Aave who are expressing their innovation in DeFi,” Stani Kulechov, Aave CEO, told CoinDesk. “This innovation has sparked interest from institutions who are now dipping their toes into Aave.” 

This is only the second time that a project has had more “total value locked” (TVL) than MakerDAO, as measured by DeFi Pulse. On June 20, fueled by a yield farming rush spurred on by the initial distribution of its governance token COMP, Compound took the lead for collateral locked up until late July.

For context, though, when MakerDAO and Compound switched positions, each had about $480 million in TVL. MakerDAO now has well over twice the collateral locked up as it had then. 

In the recent surge of interest in DeFi, four projects have now broken $1 billion in assets as measured by DeFi Pulse at different times: MakerDAO, Compound, Aave and Curve.

Fertile soil

Founded as EthLend, Aave was conceived as a peer-to-peer crypto lender, funded by a 2017 initial coin offering that raised $16.2 million, according to Messari. It later pivoted to the pooled lending approach it uses today.   

With creative new communities of yield farmers coming up with wild schemes, Aave has proven to be a key financial backbone of some projects, as Devin Walsh of CoinFund explained to CoinDesk.

In particular, she noted that Curve and Yearn Finance rely on Aave. “Stablecoin deposits into either of those protocols will ultimately be deposited into Aave’s money markets. Both Yearn and Curve’s yield farming programs have contributed to the massive spike in TVL over the past few weeks and in particular over the past week,” she wrote in an email. 

Another relevant project is Opium, which announced Saturday it had created a credit default swap (CDS) on the Aave protocol. A CDS is a type of contract that insures the buyer against a third party defaulting on a loan. These instruments are best known for their role in the 2008 financial crisis, though they arguably provide markets an early warning signal of credit problems.

Aave has announced a governance token distribution plan, but it has not yet taken effect. So while liquidity mining is coming to the protocol, it’s not driving the current surge.