What is Aave?
Aave is the largest lending market in decentralised finance: software that lets anyone earn interest on crypto or borrow against it, with no bank in the middle. This guide explains how it works, who runs it, and what can go wrong.
- Founded 2017 in Helsinki
- “Aave” = ghost in Finnish
- V4 live since March 2026
- 16M AAVE max supply
“Aave” is the Finnish word for ghost.
Live market data
AAVE is the governance token. GHO is the protocol's own dollar stablecoin. Prices load live from CoinGecko when your browser allows it.
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Protocol snapshot (checked October 2026)
Aave in 60 seconds
The short version, before the long one.
What it is
Aave is a set of smart contracts, mostly on Ethereum, that work like a money market with no bank in the middle. People deposit crypto to earn interest. Other people borrow that crypto by locking up collateral worth more than the loan.
Why it matters
It is the largest lending protocol in decentralised finance (DeFi). Since 2020 it has processed trillions of dollars in deposits, and at its mid-2025 peak it held more than $50 billion in net deposits.
Who runs it
Nobody owns the pools. Rules are set by the Aave DAO, meaning holders of the AAVE token who vote. Most products are built by Aave Labs, the company founded by Stani Kulechov. The two have argued loudly about who controls what.
What the name means
"Aave" is the Finnish word for ghost. The project began in Helsinki in 2017 as ETHLend and took its current name in 2018.
The five ideas to remember
- Pooled lending. Lenders do not pick borrowers. Everyone deposits into a shared pool and borrowers draw from it.
- Over-collateralised. You must lock up more value than you borrow. There are no credit checks because the collateral is the guarantee.
- Rates set by a formula. Interest moves with how much of the pool is in use. Busy pool, higher rate.
- Liquidation. If your collateral falls too far, anyone can repay part of your loan and take some collateral at a discount. This protects depositors.
- Token governance. AAVE holders vote on which assets are listed, the risk settings and how revenue is spent, including buying back AAVE.
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Origins: from ETHLend to the ghost
A Finnish law student, a 2017 token sale and a design that did not work until it was rebuilt.
In 2017 Stani Kulechov was studying law at the University of Helsinki. He had been programming since his early teens and became interested in Ethereum because smart contracts looked like agreements that could enforce themselves. His first product, ETHLend, let one person post a loan request and another person fund it, with crypto as collateral.
ETHLend raised money in a token sale in November 2017. The figure most often cited is about $16 million, in exchange for the LEND token. The timing was awkward. The 2018 bear market arrived within weeks, and the peer-to-peer design had a basic flaw: a lender had to wait for a matching borrower, and a borrower had to wait for a lender. Liquidity was thin and loans were slow to fill.
In September 2018 the company renamed itself Aave and began rebuilding around a different idea, the liquidity pool. Instead of matching individuals, everyone would deposit into one pot per asset and borrowers would draw from it instantly at an algorithmic rate. Compound had shown a pooled model on Ethereum in 2018. Aave's version added features of its own, most famously the flash loan.
Aave V1 went live on Ethereum in January 2020. Within months "DeFi summer" arrived and deposits grew from a few million dollars to more than a billion. In October 2020 the LEND token was swapped for AAVE at 100 LEND to 1 AAVE. That cut the supply from 1.3 billion to 13 million, and 3 million new tokens were created for an ecosystem reserve, giving the 16 million cap that still stands. The same change handed control of the protocol to token holders.
Deep diveWhy "peer-to-pool" beat "peer-to-peer"
In a peer-to-peer market each loan is a separate deal with its own rate, term and collateral. That is flexible but slow. In a pool, every deposit of the same asset is interchangeable, so a borrower can take a loan the second they post collateral and a depositor can leave whenever there is unborrowed liquidity. The price of that convenience is shared risk: all depositors in a pool are exposed to all collateral accepted by it. Much of Aave's later design, including isolation mode, e-mode, caps and the V4 hub-and-spoke layout, is about limiting that shared risk.
Deep diveThe funding behind the company
Beyond the 2017 token sale, the company raised venture money in 2020 from investors that included Framework Ventures, Three Arrows Capital, ParaFi Capital, Blockchain Capital, Standard Crypto and Blockchain.com Ventures. In 2026, during a governance fight, Marc Zeller of the Aave Chan Initiative published a critical tally claiming Aave Labs had received roughly $86 million over its lifetime from the token sale, venture rounds, DAO payments and swap fees. Aave Labs disputed the framing and published its own account of what it had built. Both sides had a stake in the argument, so treat each figure as a claim.
Timeline
Nine years in one list. Filter by type.
How Aave works
Supply, borrow, collateral, health factor, liquidation and the interest-rate curve, with tools you can play with.
Supply
You deposit an asset such as USDC or ETH. In V3 you receive aTokens (aUSDC, aWETH) in return. Their balance grows every block as interest accrues, and you can redeem them for the underlying asset whenever the pool has liquidity.
Use as collateral
Most supplied assets can back a loan. Each has a loan-to-value (LTV) limit, the most you can borrow against it, and a slightly higher liquidation threshold, the point where the position becomes unsafe.
Borrow
You take out a different asset, up to your limit. There is no fixed term and no monthly payment. Interest is added to your debt continuously at a variable rate, and you repay when you like.
Why would anyone borrow less than they lock up?
Because they want to keep the collateral. A holder of ETH who needs dollars can borrow stablecoins without selling, which avoids a taxable sale in many countries and keeps exposure to ETH. Traders use loans to build leveraged or short positions. Funds borrow stablecoins against staked ETH to run yield strategies. And a large share of activity is "looping": depositing a yield-bearing token, borrowing its base asset, and repeating.
Health factor: the one number borrowers watch
Aave boils every position down to a single figure:
health factor = (collateral value × liquidation threshold) ÷ debt value
Above 1, the loan is safe. At or below 1, it can be liquidated. A liquidator repays part of the debt and receives the same value of collateral plus a bonus, typically around 5% to 10% depending on the asset. In V3, up to half the debt can be repaid in one go, or all of it if the health factor has fallen below 0.95 or the position is small.
Explainer 1: health factor and liquidation simulator
Illustrative risk settings, close to typical Aave V3 Ethereum values. Real parameters change by governance vote and differ per market.
Two lessons fall out of the simulator. First, borrowing the maximum leaves almost no room: with ETH at an 80.5% LTV and an 83% threshold, a fall of about 3% is enough. Second, e-mode lets you borrow much more against a closely related asset, but the cushion is thinner still, which is why it is only offered where the two prices are expected to move together.
The interest-rate curve
Aave has no committee setting rates day to day. Each asset has a curve that maps utilisation, the share of the pool that is borrowed, to a borrow rate. Below a target called the optimal utilisation (the "kink"), the rate climbs gently. Above it, the rate climbs steeply. The steep part exists to do one job: when a pool is nearly empty, make borrowing so expensive that people repay, and make supplying so rewarding that new deposits arrive, so that existing depositors can withdraw.
Depositors earn what borrowers pay, minus the reserve factor, a cut that goes to the DAO treasury. Since only the borrowed part of the pool pays interest, the supply rate is always lower than the borrow rate.
Explainer 2: utilisation curve explorer
Presets are illustrative shapes, not live parameters.
Flash loans: borrowing with no collateral, for one transaction
A flash loan lets anyone borrow any amount of idle liquidity with no collateral at all, on one condition: it must be repaid, plus a small fee, before the same transaction finishes. If it is not, the whole transaction is cancelled as if it never happened, so the pool cannot lose. Aave introduced the idea to a wide audience in 2020. The fee was 0.09% in early versions and is 0.05% by default in V3.
Explainer 3: a flash loan, step by step
Honest uses include arbitrage, swapping the collateral behind a loan in one step, refinancing between protocols and liquidating unsafe positions without holding capital. Flash loans have also supplied the firepower for attacks on other protocols with weak price feeds. The loan is a neutral tool; the weakness is in the target.
Risk controls added over time
Efficiency mode (e-mode)
Introduced in V3. When collateral and debt are closely correlated, for example a liquid staking token against ETH or one dollar stablecoin against another, borrowers may opt into a category with much higher LTV. Later updates ("liquid e-modes") allow an asset to sit in several categories.
Isolation mode
Newer or riskier assets can be listed as isolated collateral. A borrower using one can only borrow approved stablecoins, up to a debt ceiling for that asset, and cannot mix in other collateral. A problem with a small token then stays small.
Supply and borrow caps
Every asset has a maximum amount that can be supplied and borrowed. Caps stop anyone from piling a huge amount of an illiquid token into the pool, the pattern behind the 2022 CRV incident.
Oracles and guards
Prices come mainly from Chainlink feeds. Extra adapters cap how fast a yield-bearing token's price may rise, and since 2025 Aave has used Chainlink's SVR feeds, which return part of the profit from liquidations to the DAO.
Guardians and stewards
Small multi-signature committees can pause or freeze a market in an emergency, and "risk stewards" can adjust caps and rates within limits the DAO has set. Larger changes need a full vote.
Umbrella
The backstop that pays for bad debt. It replaced the older Safety Module in June 2025. See the next section.
Versions and products
V1 to V4, GHO, Umbrella, Horizon and the consumer app.
Four versions
| Version | Launched | What changed | Status in October 2026 |
|---|---|---|---|
| V1 | January 2020 | Pooled lending, aTokens, flash loans, a choice of stable or variable rates. | Retired. |
| V2 | December 2020 | Tokenised debt, credit delegation, collateral swaps, cheaper transactions. | Frozen to new activity and being wound down. |
| V3 | March 2022 (Ethereum mainnet: January 2023) | E-mode, isolation mode, caps, cross-chain design. Upgraded in place through 3.7 in April 2026. | Still holds the great majority of deposits and earns nearly all revenue. |
| V4 | 30 March 2026 | Hub-and-spoke layout: shared liquidity hubs feeding separate markets with their own rules. | Live on Ethereum, Avalanche, Arc and Base. Growing under caps. |
Aave V4: hubs and spokes
V3 has a weakness that became obvious as Aave grew. Each market is a single pool, so to offer a different risk profile the DAO had to launch a whole new market with its own separate liquidity. V4 splits the job in two. A hub holds the liquidity. Spokes are the places where users actually supply and borrow, each with its own collateral list and risk rules. The hub grants every spoke a credit line, and a spoke can never draw more than that line. If something goes wrong in one spoke, the damage is capped.
V4 launched on Ethereum on 30 March 2026 after more than two years of work, with three hubs that Kulechov summarised to The Block as "Prime is the low risk, Core is the risk-adjusted, and Plus is the risk return." Deposits were tightly capped at first. They passed $100 million in May and $400 million by mid-August 2026. V4 reached Avalanche in July, Circle's Arc chain in September, and Base in late September with a hub for borrowing dollars against tokenised shares of seven large US technology companies. Proposals for Monad and for outside firms to curate their own hubs were under discussion in October 2026. New spokes still need DAO approval.
GHO and sGHO
GHO (said "go") is a dollar stablecoin created by the Aave DAO, live since 15 July 2023. It is minted when a user borrows it against collateral on Aave, and burned when the loan is repaid. The difference from borrowing USDC is where the interest goes: all of it goes to the DAO, since no depositor had to supply the GHO first. GHO can also be created through stability modules that swap it one-for-one with USDC or USDT, which helps hold the price at a dollar.
GHO traded below its peg for months after launch, reaching roughly $0.96 to $0.97 in late 2023, before measures including the stability modules and a savings rate brought it back. sGHO is the savings version: deposit GHO, earn the Aave Savings Rate, with no lock-up and no slashing. In late August 2026 sGHO held about 158.6 million GHO and the savings rate was raised to 4.5%. GHO remains small next to USDT and USDC, and next to rivals such as Sky's USDS.
From Safety Module to Umbrella
From 2020, AAVE holders could stake in the Safety Module and earn rewards. In return up to 30% of their stake could be sold to cover a shortfall. It was never actually used. Slashing needed a governance vote, and selling AAVE to cover a loss in a falling market was unattractive.
Umbrella, live since June 2025, works differently. Users stake the asset that is itself at risk, for example aUSDC, aUSDT, aWETH or GHO. If bad debt in that asset passes a set threshold, the matching staked tokens are burned automatically to cover it, with no vote. Stakers are paid for taking that risk and must wait through a 20-day cooldown to leave. Its first serious test, the rsETH incident of April 2026, showed its limits: the potential hole was larger than the wETH vault was built for, and the DAO paused it and chose a negotiated rescue instead.
Horizon: lending against real-world assets
Horizon, launched in August 2025, is a separate permissioned market. Approved institutions post tokenised assets such as US Treasury funds as collateral, and anyone can supply the stablecoins they borrow. It held about $550 million in net deposits by December 2025. Partners named by Aave include Circle, Ripple, Franklin Templeton and VanEck. Critics inside the DAO argued in early 2026 that incentive spending on Horizon far exceeded the revenue it returned.
The Aave App
Aave Labs unveiled a savings app for ordinary users in November 2025, starting on Apple's App Store with a waitlist. It hides the wallets and gas fees: users fund an account from a bank and earn a rate that comes from lending on Aave. Launch marketing spoke of up to 9% with boosts and of protection on balances up to $1 million. A July 2026 launch plan put to the DAO described a phased rollout from 1,000 users to general availability over about four months, a "Stable Vault" allocating mostly to sGHO, coverage for defined failures funded by a $5 million first-loss pool, and about 50,000 people on the waitlist. Coverage of that kind is a private arrangement with conditions. It is not government deposit insurance.
AAVE tokenomics
A fixed supply, a vote, and since 2025 a claim on revenue through buybacks.
What the token does
- Governance. One AAVE, one vote, and votes can be delegated. Staked AAVE (stkAAVE) counts too.
- Staking. stkAAVE earns rewards. Under Umbrella it no longer serves as the main first-loss capital, and slashing of legacy stkAAVE was switched off during the transition.
- Revenue link. The DAO uses part of protocol revenue to buy AAVE on the open market. This is the heart of the 2025 "Aavenomics" update.
- Borrowing perks. stkAAVE holders have had discounts on GHO borrowing. The Aavenomics plan proposed replacing that with Anti-GHO, a non-transferable credit that offsets GHO debt or converts to savings GHO. Check the governance forum for its current status.
How the supply was originally split
13 million AAVE went to LEND holders in the 100-to-1 swap, and 3 million were created for the Ecosystem Reserve. Tap a segment for detail.
Aavenomics: the fee switch and buybacks
For years AAVE holders governed a protocol that earned real money without any of it reaching them, apart from staking rewards paid in newly released tokens. That changed in 2025. In April the DAO approved a first programme spending $1 million a week on AAVE purchases for six months. In late October 2025 a proposal from the Aave Chan Initiative and TokenLogic turned this into a standing programme of up to $50 million a year, paid from revenue, with weekly amounts adjusted to conditions. Purchased tokens are held by the treasury. The April 2026 "Aave Will Win" vote then added revenue from Aave-branded products, such as swap fees on aave.com, to what flows to the DAO.
Buyback arithmetic
A calculator, not a forecast. It shows how a budget converts into a share of supply at a price you choose.
People and organisations
Who builds Aave, who governs it, who is paid to look after it, and the fight over who owns the name.
- RoleFounder and CEO, Aave Labs
- BackgroundFinnish; raised in Helsinki
- EducationLaw, University of Helsinki (master's)
- FoundedETHLend, 2017
- BasedLondon
Stani Kulechov
Stani Kulechov is the reason Aave exists and, nine years later, still its most powerful single voice. He taught himself to program as a teenager and, according to published profiles, took a break from school at 15 to work on a paid software project before going back to finish. He chose to study law, not computer science, at the University of Helsinki, and has said that his interest in contracts is what drew him to Ethereum.
He started ETHLend in 2017 while still a student and ran the token sale that November. When the first design struggled, he led the change to pooled lending and the new name. He moved the company's base to London, where the UK regulator granted an Aave entity an electronic money institution licence in 2020.
Kulechov is known for a builder's temperament and a long list of side projects. He launched the Lens social protocol in 2022 after a public spat with Twitter, grouped his companies under the Avara name in 2023, and then reversed course: Lens was handed to Mask Network in January 2026, and the Avara brand and the Family wallet were retired in February 2026 so that the company could focus on Aave alone. He is also an early-stage investor; profiles list backings in projects such as Lido, Maple and PoolTogether.
His wealth and his influence are both points of contention. Bloomberg reported that he bought a London mansion for about £22 million, news that surfaced during the 2025 dispute over fees. He bought nearly $10 million of AAVE in late 2025. Critics said addresses linked to him and Aave Labs decided the close March 2026 funding vote; an analysis by Marc Zeller claimed about 233,000 AAVE in Labs-linked clusters. Kulechov's position is that Aave needs a well-funded product company and less infighting. After the April 2026 vote he told followers the aim was "more execution and less politics", as quoted by The Block.
In April 2026, after the rsETH incident, he pledged 5,000 ETH of his own money to the rescue fund. His stated ambition is to grow Aave from tens of billions of dollars in assets to a trillion, mostly by reaching people and institutions who never touch a crypto wallet.
The organisations
Aave Labs
The private company behind the original protocol, V4, GHO's design, the aave.com interface, Aave Pro, the Aave App, Aave Kit and Horizon. Called Aave Companies in its early years and part of Avara from 2023 to early 2026. Since April 2026 it is funded mainly by the DAO: $25 million in stablecoins over a year and 75,000 AAVE over four years, in exchange for sending all revenue from Aave-branded products to the treasury.
The Aave DAO
AAVE holders and their delegates. Proposals move from forum discussion to an off-chain "temp check" and ARFC vote on Snapshot, then to a binding on-chain AIP. The DAO controls the contracts, the treasury (about $138 million by DefiLlama's count in October 2026, much of it AAVE) and the hiring of service providers.
BGD Labs
Founded in 2022 by former Aave engineers including ex-CTO Ernesto Boado. BGD maintained V3, shipping versions 3.1 to 3.7, and built much of the governance system and Umbrella. It announced in February 2026 that it would not renew, citing centralisation and its exclusion from V4, and offered a short security retainer.
Aave Chan Initiative (ACI)
Marc Zeller's delegate firm, founded in 2023. It ran much of day-to-day governance and the Merit incentive programme, and co-wrote the buyback plan. Zeller, a former Aave employee, became Labs' sharpest critic. ACI announced in March 2026 that it would exit by July, though Zeller has remained an active delegate.
Chaos Labs
Risk manager since 2022, led by Omer Goldberg. It set caps and parameters and ran automated risk oracles. It resigned on 6 April 2026, saying its budget did not cover the cost of supervising V3 and V4 together and that it disagreed with the direction.
LlamaRisk
Risk provider, originally focused on collateral and legal reviews. After Chaos Labs left it became the main risk voice and now posts the regular cap and rate changes for V3 and V4.
TokenLogic
Treasury and finance. Runs the buybacks, manages GHO rates as a steward and drafted the DAO's funding plan for the rsETH rescue.
Auditors, oracles, delegates
Security reviewers such as Certora, Chainlink for price feeds and cross-chain GHO, and delegate platforms such as Areta. Gauntlet was the original risk manager and left in early 2024.
The 2025–2026 governance fight, in order
March 2025Horizon and the token that never was
Aave Labs proposed Horizon with a possible new token, of which the DAO would get 15%, plus a profit share. Delegates objected that a second token would dilute AAVE. Within days Kulechov confirmed that no new token would be created. Horizon launched later that year without one.
December 2025The CoW Swap fees
Aave Labs replaced the swap provider on aave.com with CoW Swap. A delegate noticed that fees which had previously gone to the DAO treasury were now going to an address controlled by Labs, with no vote or announcement. Labs' answer was that it builds and pays for the website, so interface revenue is its own. Many token holders answered that the Aave name and users give that interface its value, and the DAO had paid for the brand to be built.
Late December 2025The brand ownership vote fails
Ernesto Boado of BGD Labs proposed that the DAO take ownership of the brand assets: domains, social accounts and trademarks. The proposal was pushed to a Snapshot vote over the holidays, a move its own author objected to. It failed with about 55% against and many abstentions. A large holder sold about $38 million of AAVE during the row and the price fell sharply.
January to March 2026"Aave Will Win" and the walk-outs
Kulechov first offered to share some non-protocol revenue, then in February proposed a bigger trade: 100% of revenue from Aave-branded products to the DAO, a foundation to hold the brand, and V4 as the future, in return for about $51 million of funding. BGD Labs announced its exit on 20 February. The temp check passed in early March with only 52.58%, and ACI announced its exit on 3 March, alleging that Labs-linked wallets had carried the vote.
April 2026Resolution, of a kind
A revised, smaller package went to a binding vote: $25 million in stablecoins and 75,000 AAVE vesting over four years instead of two. It passed on 12 April 2026 with about 75% support, with ACI the largest vote against. Chaos Labs had resigned days earlier. Six days after the vote, the rsETH incident hit.
October 2026The Aave Foundation
The promised foundation reached a vote. "Phase 1" proposes a memberless Cayman Islands foundation company to hold the Aave trademark and related intellectual property, with an independent director and supervisor whom only the DAO can replace, and a free licence back to builders. A Snapshot vote opened in the first week of October 2026. Transfers of the actual trademarks, domains and code rights are left to later phases.
Ecosystem: who uses Aave
From individual savers to funds, other protocols and, increasingly, regulated institutions.
Individuals
Earn interest on stablecoins or ETH, or borrow against holdings without selling them.
Leverage and yield strategies
Looping staked ETH and other yield tokens against their base asset is one of the biggest sources of borrowing. It is also what made the rsETH incident so sharp.
Other protocols
Liquid staking and restaking issuers (Lido, EtherFi, Kelp), Ethena, Pendle and many vaults and wallets build on Aave's pools. Several planned their own V4 spokes.
Fintechs and wallets
Apps route customer savings into Aave behind the scenes. Aave Kit is Labs' toolkit for this, and custody firms such as Fireblocks and Blockdaemon offer access to clients.
Institutions
Horizon serves tokenised-fund holders. An "Aave Institutional" proposal from September 2026 would have the DAO lend stablecoins to institutions against BTC and ETH held with custodians, starting with 25 million GHO of capacity.
Liquidators and arbitrageurs
Automated bots keep the system solvent by liquidating unsafe loans, often funded by flash loans.
Where Aave runs
V3 spread to roughly two dozen networks. DefiLlama listed 23 chains with deposits in October 2026, with Ethereum holding around 83% of the total. Sizeable markets exist on Arbitrum, Base, Avalanche, Plasma, Polygon, Optimism, BNB Chain, Linea, Gnosis, Mantle, Ink and Monad among others, and a launch on OKX's X Layer coincided with V4.
The direction has turned from expansion to pruning. A December 2025 vote set a revenue floor of $2 million a year for new deployments and agreed to close the zkSync, Metis and Soneium markets. In July 2026 LlamaRisk proposed winding down six networks altogether (Sonic, Scroll, zkSync, Metis, Soneium and the non-EVM Aptos deployment) and retiring 50 little-used asset listings, covering about $98 million of deposits. If you hold funds on a small Aave market, check its status.
The Lens spin-off
Lens Protocol was Kulechov's attempt at a social network where users own their profile and followers. It launched on Polygon in 2022, raised $15 million in 2023 and moved to its own chain in 2025. It was never part of the Aave protocol and never shared the AAVE token. Stewardship passed to Mask Network in January 2026.
Roadmap and what comes next
Stated plans, not promises. No predictions here.
Grow V4, retire V3 slowly
Raise caps, add spokes and chains, and let outside risk firms curate hubs. Aave Labs has talked of beginning to wind down V3 some 8 to 12 months after V4's launch. Critics note V3 still earns nearly everything.
The Aave Foundation
Phase 1 was at Snapshot in October 2026. The phases that matter most, moving trademarks, domains and code rights, come later.
Aave App rollout
Phased release in the US, eight EU countries and the UK, with Android to follow iOS. The stated goal is a million users.
Institutional credit
Off-chain, over-collateralised lending to institutions through Aave Institutional, alongside Horizon's target of $1 billion and beyond.
GHO at the centre
Deeper use of GHO and sGHO in V4 and the app, and expansion to more chains through Chainlink's cross-chain protocol.
Who watches the risk?
With BGD Labs, ACI and Chaos Labs gone, the DAO is rebuilding its bench. Kulechov has said the era of "vendor lock-ins" is over. The April 2026 incident made the stakes plain.
Aave compared
Against other lenders, and against the thing most people actually use: a bank.
| Aave | Compound | Morpho | Sky / Spark | Maple | Bank savings account | |
|---|---|---|---|---|---|---|
| Model | Shared pools (V3); hubs and spokes (V4) | One base asset per market (V3 "Comet") | Isolated markets combined by curated vaults | Stablecoin issuer with its own lending arm | Managed lending to vetted institutions | Bank lends deposits at its discretion |
| Who sets risk | DAO and its risk providers | DAO and its risk providers | Independent vault curators | Sky governance | Maple's credit team | The bank and its regulator |
| Borrowers | Anyone, over-collateralised | Anyone, over-collateralised | Anyone, over-collateralised | Anyone, over-collateralised | Approved institutions | Credit-checked customers |
| Own stablecoin | GHO | None | None | USDS / DAI | syrupUSD yield tokens | n/a |
| Rates | Variable, by utilisation | Variable, by utilisation | Variable per market; some fixed-term | Largely set by governance | Negotiated | Set by the bank |
| Deposit protection | None from government. Umbrella and treasury as backstops | None from government. Reserves | None. Risk depends on the vault chosen | None from government. Surplus buffer | None from government | Government insurance up to a limit in most countries |
| Size | Largest DeFi lender | Much smaller than its 2021 peak share | Fast-growing main rival | Major stablecoin system | Leading on-chain institutional lender | Vastly larger |
| Main trade-off | Deep liquidity, but depositors share exposure to every collateral in a pool | Simpler and more conservative, fewer assets | Flexible, but you rely on the curator's judgement | Rates and risk tied to one issuer | Counterparty and credit risk | Lower yield, strong legal protection |
Qualitative comparison, checked October 2026. Every option here has lost users money at some point, except insured bank deposits within the limit.
Wallets for AAVE and for using Aave
AAVE is a standard ERC-20 token on Ethereum, so any Ethereum wallet can hold it.
Where and how to get AAVE
A step-by-step for beginners. This is a how-to, not a recommendation to buy.
- Decide what you actually want. You do not need AAVE to use Aave. Depositing or borrowing only needs the asset you supply and some ETH (or the local chain's token) for fees. AAVE is for governance and exposure to the token.
- Pick a venue. AAVE is listed on most large exchanges, including Coinbase, Kraken, Binance, OKX and Bitstamp, and trades on decentralised exchanges such as Uniswap. Availability depends on your country.
- Open and verify an account. Regulated exchanges require identity checks. Turn on two-factor authentication with an app, not SMS.
- Fund and buy. Deposit money, find the AAVE pair, and use a limit order if you want to control the price. Check the fee before confirming.
- Withdraw to your own wallet (optional but sensible). Copy your address, send a small test amount first, and pick the Ethereum network unless you know you want another. The genuine Ethereum token contract begins 0x7Fc6…DDaE9; confirm the full address on Etherscan or CoinGecko.
- If you swap on-chain, check the token address yourself. Fake AAVE tokens and fake Aave websites are common. Type aave.com by hand or use a bookmark.
- Keep records. Buying, swapping and earning interest can all be taxable events depending on where you live.
How toSupplying to Aave for the first time
- Open the official app and connect your wallet. Check the network at the top.
- Choose an asset, press Supply, and approve the token (one transaction) and then the deposit (a second).
- Your balance now shows as an aToken and grows on its own.
- If you borrow, keep the health factor well above 1. Many careful users stay above 2 for volatile collateral and set price alerts.
- To leave, withdraw. If utilisation is at 100% you may have to wait until borrowers repay or new deposits arrive.
Risks, incidents and criticisms
The core contracts have not been hacked. Users and the DAO have still lost money, and the weak points are worth knowing.
Collateral risk
A pool is only as sound as the worst asset it accepts at scale. If a collateral token loses its backing or its price feed is wrong, borrowers can walk away with good assets and leave bad ones behind. Depositors of the borrowed asset bear the hole unless a backstop covers it.
Liquidity risk
Your deposit is lent out. When many people withdraw at once, utilisation hits 100% and withdrawals stall until rates pull money back. This happened to ETH depositors in April 2026.
Liquidation risk
Borrowers can lose a large part of their collateral in minutes in a crash, plus a penalty. Over $4.6 billion had been liquidated on Aave by early 2026 across more than 310,000 events.
Smart contract and upgrade risk
Code is audited and battle-tested, but V4 is new, contracts are upgradeable by governance, and the team that maintained V3 has left.
Oracle risk
Aave trusts external price feeds. Some assets are deliberately priced by formula instead of by the market, which avoids false liquidations but can hide a real loss of backing.
Governance and concentration
Voting power is concentrated. Analyses during the 2026 dispute argued that addresses linked to the founding team could swing close votes. Emergency multisigs can pause markets.
Stablecoin risk
GHO has traded below a dollar before and its stability modules can run low: the USDC module was empty and the USDT module held about $22.5 million in early October 2026.
Regulatory risk
The US SEC closed a four-year investigation into Aave in August 2025 without action. Rules for DeFi interfaces, stablecoins and consumer yield products are still being written in the US, EU and UK.
Incident file
Nov 2022The CRV short and $1.6 million of bad debt
Trader Avraham Eisenberg, fresh from draining Mango Markets, borrowed tens of millions of CRV tokens on Aave V2 and sold them, apparently hoping to force a cascade. The price rose instead and he was liquidated, but CRV was too illiquid to unwind cleanly, leaving about $1.6 million of bad debt. The DAO covered it from the treasury, froze a batch of thin V2 markets and leaned harder on the caps built into V3.
2023Curve founder's loans and a V2 bug
In mid-2023 Curve's founder had a very large CRV-backed stablecoin loan on Aave V2 that could not have been liquidated without crashing the token, and the DAO debated buying CRV to defuse it. He repaid over time. In November 2023 a reported vulnerability led guardians to pause several V2 and V3 markets as a precaution. No funds were lost.
10 Oct 2025The October crash
A tariff shock triggered the largest single-day wipe-out of leveraged positions in crypto history. Aave liquidated more than $250 million of collateral that day, automatically, and no significant bad debt was reported. One design choice drew attention: Aave priced Ethena's USDe by reference to the dollar, not its exchange price, so a brief plunge on Binance did not liquidate Aave users.
Jan–Feb 2026Record liquidations
As bitcoin fell towards $60,000 and ETH towards $1,750, Aave processed about $429 million of liquidations in six days across some 12,500 transactions, a record in dollar terms.
18 Apr 2026The KelpDAO rsETH exploit: Aave's hardest test
What happened. An attacker forged a message to the LayerZero bridge used by KelpDAO's restaked ETH token, rsETH, and obtained tokens with nothing behind them. Reports give 116,500 unbacked rsETH, about $292 million; Aave governance documents later counted 152,577 rsETH released from the bridge adapter. The attack was widely attributed to North Korea's Lazarus Group. Aave's own contracts were not breached.
How it reached Aave. rsETH was accepted as collateral with a high borrowing limit against ETH. The attacker deposited the worthless tokens on Aave V3 on Ethereum and Arbitrum and borrowed real wrapped ETH. Early estimates of the resulting bad debt ranged from about $124 million to $230 million.
The run. Depositors rushed to withdraw ETH. DefiLlama showed Aave's TVL falling from $26.4 billion to under $20 billion in a day and to about $17.7 billion at the low. AAVE fell about 16% to near $92. rsETH and ETH markets were frozen and the wETH Umbrella vault was paused.
The rescue. Instead of letting ETH depositors or Umbrella stakers take the loss, Aave led a coalition called DeFi United to refill rsETH's backing. Kelp and the Arbitrum Security Council froze stolen funds, the attacker's positions on Aave and Compound were liquidated in a controlled way, and donors including EtherFi, Lido, Ethena, Golem, BGD Labs and its founders and Kulechov himself pledged ETH. Mantle offered a credit line of up to 30,000 ETH, and the Aave DAO was asked for 25,000 ETH from its treasury. The coalition reported more than $300 million in commitments. Kelp sent the final tranche on 25 May 2026 and declared rsETH fully backed again, five weeks after the attack. By the end of May Aave reported ETH liquidity fully restored, with rsETH still frozen as a precaution.
What it showed. Aave absorbed someone else's failure because its pooled design let a single collateral token put the whole ETH pool at risk. Depositors were made whole, at real cost to the DAO and donors. Deposits recovered to $30 billion by Aave's count in August 2026. The episode is the strongest argument both for V4's capped spokes and against high borrowing limits on complex wrapped assets.
Common criticisms
- "It mostly funds leverage." True in large part. Much borrowing is looping and trading, not lending to the real economy. Horizon and institutional credit are attempts to change that.
- "Decentralised in name." The DAO controls the contracts, but one company has built most products, controlled the brand and holds large voting weight. The foundation is meant to address the brand part.
- "Growth came before caution." Listing restaking tokens with generous limits brought deposits and then the April 2026 crisis. Aave published a stricter risk framework in June 2026 and began removing little-used assets.
- "Consumer marketing runs ahead of the fine print." Phrases such as "balance protection" can sound like bank insurance. They are not the same thing.
Myths and facts
Tap a card to see what is actually true.
Glossary
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Quiz: do you understand Aave?
Twelve questions, each with an explanation. Your best score is saved on this device.
Frequently asked questions
Short answers to what people search for.
What is Aave in simple terms?
Aave is a lending market that runs on blockchains instead of through a bank. People deposit crypto into shared pools to earn interest, and others borrow from those pools by locking up collateral worth more than the loan. Software sets the interest rates and enforces the rules.
Who created Aave?
Stani Kulechov founded it in Helsinki in 2017 as ETHLend while studying law. It was renamed Aave in 2018. He still leads Aave Labs, the main development company, while the protocol itself is governed by AAVE token holders through the Aave DAO.
Is Aave safe?
Aave's core contracts have not been hacked since launch in 2020, but it is not risk-free and deposits are not government-insured. Risks include failing collateral assets, price-feed errors, frozen withdrawals during a rush, and governance mistakes. In April 2026 an exploit of KelpDAO's rsETH token left a large hole in Aave's ETH market that was filled by an industry rescue.
How does Aave make money?
Borrowers pay interest. Most goes to depositors and a share called the reserve factor goes to the DAO treasury. The DAO also earns interest on GHO, flash-loan fees, part of liquidation profits and, since 2026, revenue from Aave-branded products. Revenue was about $140 million in 2025.
What is the health factor?
It is the safety score of a loan: collateral value multiplied by the liquidation threshold, divided by the debt. Above 1 is safe. At or below 1, part of the collateral can be sold by a liquidator to repay the debt, with a penalty.
What is the AAVE token used for?
Voting on how the protocol is run, staking, and exposure to the protocol's revenue through a buyback programme of up to $50 million a year. You do not need AAVE to deposit or borrow on Aave.
How many AAVE tokens are there?
The maximum supply is 16 million, fixed in 2020, and about 15.2 million are in circulation.
What is GHO?
GHO is a decentralised stablecoin designed to be worth one US dollar. It is minted when users borrow it against collateral on Aave and burned when they repay. sGHO is the savings version, which paid 4.5% a year from late August 2026.
What is Aave V4?
The fourth version of the protocol, live on Ethereum since 30 March 2026. It separates liquidity hubs from spokes, the markets where users borrow, and caps how much each spoke can draw. V3 still holds most deposits.
What happened between Aave Labs and the Aave DAO?
In December 2025 delegates found swap fees going to Aave Labs instead of the DAO, which grew into a fight over who owns the Aave brand. It was settled in April 2026 when the DAO agreed to fund Aave Labs with $25 million and 75,000 AAVE in exchange for all revenue from Aave-branded products. BGD Labs, the Aave Chan Initiative and Chaos Labs left during the dispute.
Was Aave hacked in 2026?
Not directly. On 18 April 2026 an attacker exploited a bridge used by KelpDAO's rsETH token, deposited the unbacked tokens on Aave as collateral and borrowed real ETH. Aave led a coalition called DeFi United that restored rsETH's backing by 25 May 2026.
Is Aave regulated?
The protocol is open-source software without a licence. Aave Labs holds some licences for its own products, and the US SEC closed a four-year investigation in August 2025 without action. Rules for DeFi are still developing.
Is the Aave App the same as a bank account?
No. It is a savings product from Aave Labs that earns yield by lending through the Aave protocol. It advertises balance protection for specific failures, which is a private arrangement and not government deposit insurance.
How is Aave different from Compound or Morpho?
All three offer over-collateralised lending. Aave uses large shared pools with many assets and has its own stablecoin. Compound's current version uses one borrowable asset per market. Morpho uses isolated markets grouped into vaults run by independent curators.
Sources and further reading
Primary documents first, then the reporting used for this guide. All checked in October 2026.
Figures in crypto move daily. Where sources disagreed, this guide gives the range or names the source. Corrections are welcome.
Related guides
This site is part of a family of independent explainers. These five bear most directly on Aave.
The Coin Galaxy →thecoingalaxy.com · the hub for every guide in the series- EthereumAbout 83% of Aave's deposits sit on Ethereum, and V4 launched there first
- EthenaEthena's USDe and sUSDe are among the largest collateral assets in Aave's pools
- ChainlinkChainlink feeds price every asset Aave lends against, including the SVR liquidation feeds
- OndoTokenised Treasuries of the kind Aave's Horizon market is built to accept as collateral
- HyperliquidThe other side of on-chain leverage: a perps exchange rather than an over-collateralised lender