Aave

Aave is a pool, not a matchmaker. Suppliers deposit an asset into a reserve and receive aTokens that grow as interest accrues. Borrowers post collateral and draw from the same reserve. The interest rate is set by a curve tied to utilisation: the more of a reserve is borrowed, the higher the rate for both sides. Nobody at Aave Labs decides your rate, and the protocol cannot lend your collateral to a third party.

1. 01Supply an asset, for example USDC, and start earning the variable supply rate.
2. 02Turn on that asset as collateral. Each asset has a loan-to-value limit and a liquidation threshold.
3. 03Borrow up to the limit. Your health factor compares collateral, adjusted by its liquidation threshold, with your debt.
4. 04If the health factor falls below 1, anyone can repay part of your debt and take your collateral plus a liquidation bonus. Nobody warns you first.

Liquidations happen often and are routine. In 2025 Aave processed over $1.1 billion of liquidations across more than 100,000 events (Aave Labs). That is how the protocol stays solvent when prices fall. For the borrower who gets liquidated, it is a real loss.

Two extras sit on top of plain lending. E-Mode gives higher borrowing power when collateral and debt move together, such as wstETH against ETH. GHO is Aave's own stablecoin, minted against Aave collateral. GHO supply grew to nearly $500 million in 2025, and more than half was staked as sGHO. The Aave card scores the lending product against custodial lenders.

Aave V4 went live on Ethereum mainnet on 30 March 2026 after two years of development (Aave Labs). V3 did not switch off. In September 2026 V3 still held about $18.2 billion against about $634 million on V4 (DefiLlama), so most Aave activity still runs on V3 contracts.

The point of hubs and spokes is to let a new market, such as an institutional spoke or an Ethena-focused one, draw on existing liquidity without needing its own depositors. The risk comes from the same design: a spoke with loose parameters is still borrowing from the shared hub. Labs launched every V4 hub with low supply and borrow caps. Separately, Aave Horizon, a permissioned market for tokenised real-world assets launched in August 2025 with partners such as VanEck, Circle and Securitize, held about $267 million.

Stani Kulechov, a Finnish lawyer born in Estonia, launched ETHLend in 2017 as a peer-to-peer loan board, where each loan needed a lender and a borrower to agree. In January 2020 it relaunched as Aave (Finnish for 'ghost') with pooled liquidity, the model every major DeFi lender now copies (Wikipedia). Kulechov runs Aave Labs, the company that builds the front ends and most new products.

Between December 2025 and April 2026 Labs and the DAO fought over who owns Aave. The trigger was swap fees from a CoW Swap integration on aave.com that went to Labs rather than the DAO. A delegate proposal to move ownership of the brand and IP to token holders failed on 26 December 2025, with about 63,000 votes for, 995,000 against and 742,000 abstaining. The Aave Chan Initiative and BGD Labs, two of the DAO's largest service providers, then left.

Labs answered with the Aave Will Win framework, which passed on 5 April 2026 by 727,572 votes to 174,330 (Aave governance):

• All revenue from Aave-branded products (aave.com swap fees, estimated at $12–24M a year, plus the App, Card, Pro, Kit and Horizon) goes to the DAO treasury.
• The aave.com domain, trademarks and repositories move to a separate community-protected vehicle, under its own vote.
• Labs receives $25M in stablecoins and 75,000 AAVE over four years, plus up to $17.5M in milestone grants.

Risk management changed hands too. Chaos Labs, Aave's primary risk manager since November 2022, left in April 2026, and LlamaRisk took over its functions. Our risk-manager ledger follows both firms.

Aave's own contracts have not been drained. Every material loss on record came from a collateral asset or a price feed misbehaving. The contracts are upgradeable through governance, which is how parameters get tightened quickly, and also means the rules can change while your deposit is inside.

The rsETH episode is the one to understand. rsETH was accepted at up to 95% loan-to-value on eleven Aave deployments, and its bridged versions depended on a LayerZero route secured by a single verifier. When that route was spoofed, the attacker minted rsETH that had nothing behind it and borrowed real WETH against it. Aave froze rsETH across all V3 markets within about 90 minutes. The attacker positions were liquidated on 6 May, recovering 89,567 rsETH on Aave and 17,426 on Compound (Aave governance). Suppliers on the affected markets did not take the loss, but WETH on the affected markets was frozen for weeks.

What protects a supplier is the quality of collateral that other people are allowed to borrow against. Check an asset's LTV and the chain it lives on, not just the supply APY.

Token data for AAVE is on our market page.