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Aave has solidified itself as one of the biggest money market protocols on Ethereum and the crypto space. Ranking only second to Anchor Protocol, the lending platform boasts an impressive $12.6 billion in Total Value Locked as of March 17th, 2022. However, with the release of Aave V3, one of DeFi’s longest-running projects may have just found its second wind (or, in this case, third wind) to claim the top spot.
Total Value Locked on Aave, March 17th 2022 (Source: defillama.com)
For the uninitiated, Aave essentially functions like a decentralized bank, where users can deposit their assets, be it stablecoins or other assets such as Ether or Wrapped BTC, to earn interest. Using their deposits as collateral, users can then borrow other assets to use in other DeFi protocols. Since you can only borrow less than what you deposit, these loans are considered overcollateralized, but beware as you may be liquidated if your deposits start to decrease in value.
In 2019, Aave deployed the first version of their smart contracts on the Ethereum mainnet, allowing users to gain access to liquidity on various assets and earn yield by providing liquidity. Subsequently, Aave V2 was released the following year, bringing even more improvements such as the ability to swap collateral within the protocol as well as more flexible borrowing rates. With the release of Aave V3, the lending platform is looking to expand its empire through various features catered to multichain lending and other long-tail assets, both within and beyond Ethereum.