Aave

Aave is a multichain non-custodial lending protocol for supplying, borrowing, and earning interest. The Aave DAO governs parameters, listings, and emissions; Aave Labs is the primary development company. Aave is an overcollateralised, pooled money market: lenders deposit assets into shared reserves and borrowers draw against collateral they have posted, with interest rates set algorithmically by pool utilisation rather than by a credit committee. Since Aave V3 shipped on 16 March 2022 the protocol has layered risk controls on top of that base: efficiency mode, isolation mode, and supply and borrow caps per asset. Aave V4 went live on Ethereum mainnet on 30 March 2026 with a hub-and-spoke design in which a Liquidity Hub holds assets centrally and Spokes connect to it with their own collateral types, risk parameters and liquidation rules, deployed initially as three hubs (Core, Plus, Prime) and eleven spokes. Loans are perpetual with no fixed maturity; positions are liquidated by third-party liquidators when the health factor breaches its threshold, and Aave states it has liquidated more than $4.4B safely with zero bad debt across six-plus years of uninterrupted operation. Users span retail leverage, market-neutral basis traders, treasuries, and, through Horizon, institutions borrowing stablecoins against permissioned tokenised RWA collateral.

Scale and breadth: large multichain lending network plus native overcollateralized stablecoin (GHO), staking/backstop mechanics (stkAAVE → Umbrella), and institutional/RWA lending (Horizon) under DAO governance.

- Lending markets: Core/Prime/Plus/Horizon markets: supply assets to pools, borrow against collateral, earn real-time interest. Not a token: the protocol product. - aTokens: Interest-bearing deposit receipts (e.g. aUSDC) minted on supply; they accrue yield and are redeemable for underlying + interest. - GHO: Native Aave stablecoin minted by locking approved collateral via Aave. - sGHO / StkGHO: GHO savings product: yield-bearing, not the stablecoin itself. New sGHO experience live May 2026. - AAVE / stkAAVE: AAVE governs the DAO; stkAAVE is the legacy Safety Module position being superseded by Umbrella.

- GHO (GHO): Stablecoin, Native Aave overcollateralized stablecoin - sGHO (sGHO): Stablecoin, Yield-bearing GHO savings (not the stablecoin itself) - AAVE (AAVE): Token, DAO governance token (max supply 16M) - stkAAVE (stkAAVE): Token, Legacy Safety Module staked AAVE - stkGHO (stkGHO): Stablecoin, Staked GHO backstop (Safety Module / Umbrella) - Aave aUSDC (aUSDC): Token, Interest-bearing USDC deposit receipt - Aave aUSDT (aUSDT): Token, Interest-bearing USDT deposit receipt - Aave aWETH (aWETH): Token, Interest-bearing WETH deposit receipt - stkABPT (stkABPT): Token, Staked AAVE/wstETH LP backstop (first-loss)

- Collateral: Bad collateral or oracle failures can create bad debt in lending pools. - Oracle: Stale price feeds impair liquidations and collateral valuation. - Smart Contract: Risk across V3/V4 markets, GHO, and Umbrella upgrades. - Liquidity: Thin markets impair exits and liquidations during stress. - Regulatory: Aave App is not a regulated financial product; jurisdictional exposure. - Governance: Concentration and coordination risk over emissions, buybacks, and listings. - Counterparty: Dependency on bridges, external vaults, and partner infra (e.g. Whop/Veda).

- Underwriting: similar in that No borrower credit assessment. Eligibility is a function of the asset's risk parameters (LTV, supply and borrow caps, e-mode), set per reserve by DAO vote; differs in that Repo desk underwrites the collateral, not the counterparty's balance sheet, via an eligible-securities schedule - Collateral: similar in that Overcollateralised crypto assets; from 2025 also permissioned tokenised RWAs (Superstate USTB and USCC, Centrifuge JTRSY and JAAA) inside the Horizon instance; differs in that Government bills and high-grade paper posted into a tri-party repo account - Settlement: similar in that Atomic on-chain settlement, T+0, no clearing house; differs in that DVP settlement through a tri-party agent, T+0 for overnight repo - Rate setting: similar in that Algorithmic utilisation curve per reserve, revised by governance; V4 routes rates per Spoke rather than per global pool; differs in that Repo rate set by desk against GC benchmark, re-priced daily - Recourse on default: similar in that None beyond seizing collateral. Liquidators repay debt for a bonus; the Umbrella backstop holds $148.41M as a residual buffer; differs in that Repo lender's sole recourse is to liquidate the collateral, then rank unsecured for any shortfall - Regulation: similar in that No licence. Changes go through on-chain AIPs; a 5-of-9 Community Guardian can veto malicious proposals during timelock. Horizon pushes KYC and whitelisting onto the RWA issuers, not the protocol; differs in that Broker-dealer regulated for capital, custody and conduct; eligible collateral prescribed by rule