Aave: Leader in the Decentralized Finance Space and Its Network Effects

In the field of Decentralized Finance (DeFi), network effects are crucial to success, and Aave excels in this regard. With five years of deep market experience, a user base of millions, and the deepest liquidity in the DeFi space, Aave offers unparalleled scale and network effects for projects built on its platform, which are core advantages that other platforms find difficult to replicate.

Projects collaborating with Aave can immediately access mature infrastructure, a large user base, and ample liquidity, factors that would typically take years to build independently. This unique advantage is referred to in the industry as the "Aave Effect."

Market Position of Aave

Aave is currently the largest protocol in the DeFi space, accounting for 21% of the total locked value (TVL) in the entire DeFi market, and holds a 51% share in the lending market, with net deposits exceeding $49 billion. However, Aave's true core advantage lies in its strong market penetration. Here are a few typical cases:

• After Ethena's sUSDe expanded its business on Aave, the deposit amount surged from $2 million to $1.1 billion within two months.
• A few weeks after Pendle joined Aave, users deposited PT tokens worth $1 billion, which has now increased to $2 billion.
• After KelpDAO's rsETH was incorporated into the Aave protocol, its TVL grew from 65,000 ETH to 255,000 ETH in four months, an increase of 4 times.

Aave accounts for nearly 50% of the active stablecoin market and is also a major circulation platform for Bitcoin in Decentralized Finance. It is worth noting that Aave has achieved nearly $1 billion in TVL across four major independent blockchain networks, a rare extensive layout in the industry.

Formation Mechanism of the Aave Effect

While many projects can attract deposits and expand supply through token rewards and yield farming, creating real asset utilization demand is much more challenging. This is precisely what makes Aave unique.

The active borrowing volume on the Aave platform exceeds 18 billion USD, far surpassing the total of all its competitors. After users deposit assets into Aave, these assets are either borrowed out or used as collateral to borrow other assets, ensuring that funds are always kept active.

This mechanism creates a virtuous cycle of continuously strengthening demand. When new assets are launched on the Aave market, or when teams develop based on Aave, they can all benefit from this ongoing demand. Ultimately, all participants will benefit from the actual economic activities generated by the large active user base.

This is particularly important for teams developed based on Aave. Aave has undergone five years of market testing, spanning multiple economic cycles, consistently earning the trust of developers and users. As a major platform managing billions of dollars in funds, Aave's scale far exceeds that of many emerging protocols.

In addition, developers on the Aave platform are not subject to "scale" limitations. Compared to other protocols, Aave can support higher deposit and borrowing volumes, allowing financial technology applications of various scales (whether aimed at retail users or institutional clients) to develop robustly on this platform.

Future Outlook

With the upcoming release of Aave V4, the core driving force behind the Aave effect will continue to evolve. The new version's architecture will provide developers and users with a wider range of asset access channels and unique lending strategy options.

All factors that currently give Aave an important position in the Decentralized Finance space will become even more prominent and critical in the future. As the ecosystem continues to evolve, Aave is expected to keep leading DeFi innovation, bringing more value and opportunities to the entire industry.