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🥊 Battle of the DeFi Lending Giants
Aave vs. Compound.
Hello Defiers! Here’s what we’re covering today,
Taking a look at Aave vs. Compound
DeFi markets are booming; users not so much
LINK pushing new highs
Rarible seed round
Foundation V2 launch
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🙌 Together with Zerion, a simple interface to access and use decentralized finance. Ledger, a hardware wallet combined with the Ledger application to securely buy, sell, exchange, stake, lend & manage your crypto, Kraken, consistently rated the best and most secure cryptocurrency exchange, which can get you from fiat to DeFi, and Casper, an enterprise-focused blockchain which aims to introduces unprecedented security, speed and scale for businesses.
TLDR Compound has reigned supreme as DeFi’s most popular lending protocol since its inception in 2018, but according to recent data trends, Aave has a fighting chance to take its crown.
TOKENS AAVE has massively outperformed COMP since the beginning of 2021. AAVE has soared over 450% since the beginning of January, while COMP has grown by a comparatively small (but still impressive) 240%.
MARKET CAP Compound’s market cap is $1.7B. Meanwhile, Aave’s market cap is over two times larger at $4.2B. Compound’s fully diluted market cap of $3.7B is slightly closer to Aave’s fully diluted market cap of $5.4B, but the nearly $2B difference between the two is still staggering.
TVL Data on Defi Pulse shows that Aave currently has $4.5B TVL, while Compound is lagging at $3.8B TVL—a $700M difference. Compound and Aave were neck and neck in TVL through the end of 2020. Both closed the year just under $2B TVL (with Aave only slightly ahead), but Aave has continued to gain momentum.
TVL measures supply minus borrowed assets, and Compound’s total supply is closer to $6.6B with $2.8B borrowed. Aave has $467M of loans outstanding, according to data by DeFi Pulse.
FEES Data from Crypto Fees shows that over the past 7 days, users have spent an average of $634k in fees to use Compound, compared to $184k in fees to use Aave. This suggests that despite Aave’s lead in TVL, Compound is still seeing more activity overall.
USERS (WALLETS) Compound still has way more users than Aave, as measured on Dune Analytics by the number of unique wallets. Of note, users can have more than one wallet so the metrics are somewhat inflated. Still, Compound’s 305k users vastly outnumber Aave’s 39k users (Note: The Dune Analytics data for Aave might only include Aave V1 users. Factoring in Aave V2 users would potentially raise the number.)
BORROWING VOLUME Compound is also dwarfing Aave in borrowing volume, accounting for nearly 77% of the market with a borrowing volume of $2.7B. Aave’s 23% share is spread out across Aave V1 ($489M) and Aave V2 ($341M). However, Compound maintained roughly 80% to 90% of the borrowing volume share throughout 2020, so their 2021 performance does mark a slight decline.
“It's safe to say that if we remove incentivised behaviour (Leveraged borrowing to farm COMP & Inflated unique users thanks to an ongoing Coinbase Earn campaign) the Aave Protocol is outperforming Compound in all aspects,” said Aave COO Jordan Lazaro Gustave. “I'm actually looking forward to see how outstanding debt numbers evolve when and if liquidity mining starts on Aave.”
INNOVATION Aave supports over 20 different assets while Compound only supports 11 (including ETH and DAI). Aave also offers stable interest rates while Compound does not. Aave has spearheaded cutting edge developments in DeFi, including flash loans and delegated credit vaults. In December, Compound announced plans to launch Compound Chain, a stand-alone blockchain which would provide money market functions across multiple chains. It has yet to launch.
“Compound and Aave are each hitting their stride; 2021 will be a year of phenomenal growth for both protocols,” said Compound founder Robert Leshner.
TLDR The LINK marines are pushing all time highs again as whales hoard token supply and LINK balances on exchanges keep dwindling.
WHALES ACCUMULATE The top 1% of LINK addresses have continued to accumulate the token all throughout 2020 and into 2021, and have acquired 82% of the total LINK supply, according to data from Glassnode.
DOUBLE-EDGED SWORD While this can drive up the price, it’s also a double edged sword, as it poses the inherent risk that a few big holders have the ability to unload high amounts of supply on smaller buyers.
BALANCE ON EXCHANGES The token balance on exchanges continues to dwindle (60 million tokens), revealing that ‘holding activity’ is still a strong trend.
NEW HIGHS In 2020, LINK reached an all time high of $20 before profit-taking accelerated . After five months of distribution and accumulation, the token broke through its all time high again, reaching $25 and climbing.
DEFI MARKET BOOM
TLDR It’s buy everything season in DeFi land. But while everything blows up, actual users are climbing at a slower pace.
RECORD EVERYTHING Ethereum is at an all-time high of over $1,630, as is the DeFi Pulse Index, which tracks major DeFi token prices. Total value locked (TVL) in DeFi just climbed above $30B, also a record. Decentralized exchange (DEX) volume rang in the new year by doubling to more than $50B in January.
DeFi’s lending sector tells a similar story where outstanding loans from big three lending protocols, MakerDAO, Compound, and Aave, increased by 38% during January compared to a 15% jump in December.
BUT NOT SO FAST Despite the jump in volume on Uniswap, the number of transactions for the AMM have been relatively flat on the year.
Month-to-month acceleration in lending also contrasts with the more modest uptick of unique users. Unique borrowers were mostly flat in Aave, Compound and MakerDAO, while total DeFi addresses only increased by 13%, to 1.3M, in January.
CONCLUSION Ethereum’s spike in interest and price may not immediately be bringing new users to open finance, but the jumps validate the DeFi applications built on top of the network, perhaps encouraging OGs further allocate their wealth towards protocol tokens.
RARIBLE SEED ROUND
TLDR Rarible, the community-owned non-fungible-token (NFT) marketplace, announced a $1.75M seed round from investors including 1kx, ParaFi Capital, Coinbase Ventures, and Coinfund.
USE OF FUNDS Rarible intends to use the funds to develop a decentralized autonomous organization (DAO) structure which facilitates NFT trading. Right now, governance votes cast with the RARI token are considered “advisory votes,” meaning they’re non-binding. The new funding will allow Rarible’s founders to develop a more robust governance process with binding votes.
ONE HUNDRED NFTS
TLDR Foundation added 100 new NFTs to auction as its V2 upgrade went live yesterday afternoon. The launch featured 1/1 drops running as 24 hours auctions, most starting at 1 ETH reserves with first edition items like Robbie Tilton’s Fire Sword leading the way at 5 ETH at the time of writing.
AUCTION The launch featured 1/1 drops running as 24 hours auctions, most starting at 1 ETH reserves with first edition items like Robbie Tilton’s Fire Sword leading the way at 5 ETH at the time of writing.
NFT RACE Boasting a sleek interface with intuitive bidding frameworks, a smooth flow to mint and a web3 social profile, Foundation hopes to win the growing arms race between NFT marketplaces like SuperRare, Zora and Rarible.
“Name me a dapp with a better UX” Foundation CEO Kayvon Tehranian told The Defiant.
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🧑💻 ✍️ Stories in this newsletter were written by Daniel Kahan, Owen Fernau, Christopher Attard and Cooper Turley, and edited by Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila and edited by Alp.
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