Anniversary of Nirvana, why did Aave achieve dominance?

Credit, building the DeFi sector, has always been very competitive. However, according to new data. Aave slowly crossed over to its Creation and Compound brethren this year and became a leader in the industry. Due to space constraints, this sentence will not repeat content on DeFi or Library. The goal is to explore the success of A by finding information.

cost analysis

personal innovation

Compared to programs like Compound and Maker, Aave's biggest change is to allow unsecured loans (only loans are smart contracts) and special floating model pricing. The interest rate model allows users to switch between fixed and fixed interest rates (both based on performance).

In addition to the two main features, Aave V2 also adds:

Flash Loan Upgrade:With one-time loans in various rewards, process improvements, and more.The main characteristics are:

secured transactions: Proprietary assets of AAVE financial institutions such as LINK and UNI exchanges allow users to directly exchange proprietary assets for other assets (via flash libraries without prior redemption).

Refund with deposit:Expenses can be reimbursed directly with guarantee (partial / total reimbursement).

Debt Tokenization. Borrowers may have total or different expenses and may change at any time. And after accepting the tokens on the wallet, you can distribute them to another place (native, institutional delegation of credit only). This amounts to introducing the concept of exchange of contracts.

What does Aaa solve?

"Aave is an open and discreet place that allows you to make the most of your deposits and credits at a different or stable price." (by Messari)

There are special loans for smart contracts that have flexible interest rates compared to blended interest rates and offer similar functionality to Lego money, allowing Aave to do more, such as various arbitrage industries.

History of housing development

As its name suggests, Aave has experienced a new birth. Its rulers were the famous protocol ETHLend, but for some reason ETHLend failed and had to switch to Aave (Finnish "ghost") to compete with the rulers of the time, so let's see what's wrong with ETHLend. .

First of all, ETHLend is also a lender, even thoughHowever, the main difference with Aave is that ETHLend uses the security of the peer-to-peer lending model rather than the in-pool lending model.. The biggest problem with P2P financial sharing isIt is difficult to standardize, it is difficult to match interest rates and capital, so liquidity is low, and it is difficult to have good price depth to meet the demand of libraries of various roles.Additionally, loans in these models must be set up by the lender, so the platform must be able to verify to avoid risk. Obviously, ETHLend was unable to meet the requirements at the time. Then Compound was born, and ETHLend accelerated its decline and had to switch to exchange.

However, it should be noted that there has been no bad news for ETHLend, including reports of serious breaches. I want to know more about this. Although ETHLend has a responsibility in line with ECR-20 and ENS standards, ERC-20 not only commits to the legacy of the existing chain, but also to an offline tokenized system.Then, when the borrower promises physical token default, the risk of liquidation becomes very high.It's rare ETHLend without this simple information. Unfortunately, due to the upgrade to Ave, I was unable to recognize the ETHLend process. Related information is also difficult to obtain.

Aave token model

For DeFi, the token model is an important part of the decision-making mechanism. So we need to look at the AAVE personal token----the AAVE model token. Token Issuance: Aave, formerly known as Loan, Redemption, and Loan: Replacement of Aave's 100:1 ratio.

Operation: In addition to general management such as voting and setting up. The main difference is that it is an important part of Aave's core module, the security module.Essentially, Aave will use the Aave ETH (or AAVE Pure) promised in the model to cover bad debts in the event of a business crash and failure due to bad debts, or if there are other never-before-seen events. previously.The source aave of the security module is the aave approved by the token holders. Of course, there will be many rewards, such as the distribution of the Aave, to support the carriers of the Aave.From a visual point of view, holding Aave is not enough, it must be guaranteed to the lowest level module to fully charge it.This also means that Aave has higher demands on token holders. He must make the process as efficient as possible, not just to make money, otherwise it will be a big disaster. The artwork is used to illustrate the relationship between Aave holders and the process itself.

Token Distribution: Because most of Aave is converted by the old token library. The library mainnet is offline, so we couldn't find this year's model to ship this time.Generally, Aave's total advertising volume is 16 million (1.3 billion loans are converted into 3 million additional advertising), but now the total advertising volume is less than 13 million. .

Aave Protocole Nta

Aave V2 is already online, so let's look at the differences between V1 and V2.

The first is to add two new ones.

Debt Tokenization: V2 credentials (library) are not included in the process, but become tokens.This means that the "expenses" themselves can be refunded to the user's wallet, resulting in a variety of functions.For example, many stable costs and many different positions can coexist with local management resources. Additionally, since the token itself does not need to be linked to the standard account process internally,This means that borrowers can help borrow liability without having to repay themselves.Of course, this process must include other rules governing and guaranteeing interest loans. These features, combined with the Flash Lending v2 update, which will be revealed later, will make Aave the ultimate arbitrage tool.

Solitary flash v2: Prior to Aave, mortgages such as competitive market and many non-profits were available at Aave for risk management. On the other hand, with V2, you can use your loans directly from Aave. The exercise of the right consists of reimbursing directly without exchange of movable property by barter. Redemption is important to reduce the chain cost and reduce labor costs.In the case of collateralized trading, this is very powerful, and in extreme market conditions, collateral should be exchanged for stability coins to minimize losses and reduce the need for liquidation.And convert them directly into other assets to make the most of your financial time. Engage in Debt Tokenization to learn more about Arbitrage Lending. There are also batch lending, flash liquidations, and smooth liquidity migration from V1 to V2.

The second is the optimization of some of the early features.

The main thing is to improve the structure of thought,Reduce the time it takes to validate the chain when users interfere with the process. This can be estimated at 15-20% loss., according to the announcement, if it can work with Flash Star50% savings compared to V1.This greatly improves user interest in the current situation of high Ethereum exchange rates.

Support for code model optimization, automated testing, and regular report validation tools.This is important to reduce the difficulty of verifying the rules, of course, for individuals, and users can verify the authenticity of the Aave code by themselves. The examiner works a little less.

Updated token logic. It has always been done with original thought patterns. In addition to the update to support the EIP-2612 protocol (an agreement that encourages chain users to sign signature chains to facilitate exchanges and reduce labor costs),The biggest change is that currently all fund data is no longer in the core of the lending pool and tracked directly by Token.

If you want to use another existing technology, you can submit a free form yourself and it is very comprehensive.

Token Valuation:

Let's look at the current data (as of 2021.06.09).

In terms of trading, the market token for the last two 180 days is as follows:

AW:

Subsidies :

You can see it more clearly in the photo.The AAVE market is more than that of COMP., but seeIn terms of average daily activity, AAVE is similar to COMP.. According to the NVT standard,The return value for volume and the value for AAVE should be the same as the value for COMP.. However, AAVE COMP fares are now 20% cheaper. Therefore, AAVE is a bit underrated.

However, changing the evaluation method may lead to different results. For blockchain campaigns,"Number of slots in the portfolio" is the most important indicator for determining the quality of the project.Let's look at the differences between AAVE and COMPOUND in "Number of addresses with equivalents" and "Number of addresses in wallets". The reasons for choosing these two restrictions are not "Total Address":Indeed, the first two are close to "merchants" and "consumers who have purchased" in the traditional e-commerce industry, and the second are close to "registration numbers". .So we are comparing two things like this:

As the statement above shows, AAVE currently has more of a "market cap/address" than COMP, and the industry is still worth noting that AAVE is overvalued.

Of course, there are differences between the two loan products, so a simple comparison is impossible. Therefore, it is necessary to examine the performance differences between the two companies in the secondary market.

Primary and secondary market

First, we can see the performance of protocol tokens related to DeFi-Lending since May 31.

Source: Bloc Inside, Messari

As you can see from the top table, The market value of AAVE is now almost three times that of the ingredients, a grossly exaggerated figure, and in other respects the case of the two is not much different.. In addition to the concentration of chips, the concentration of AAVE is higher. The cause of this phenomenon is that the vaccines caused by the May 19 event cannot be avoided. Compared to COMPOUND, AAVE is safer, more rigorous, and V2 offers users a way to reduce their downtime due to inclement weather.AAVE itself continues to be consumed by large whales, increasing its concentration.The advantages of AAVE over COMP will be discussed later.

Second, since AAVE receives the DAO format and token holders can benefit by joining the special AAVE security module, you will need to look at the token holders token and communities to make decisions in advance of their development.

You can see in the picture above. 2 Find two different parts of user indicated and the measurements in the non-big community. Then the problem occurs. Why do business business? Of course, the total number of ads on AAVE is 16 million, but the total number of ads on COMP is 10 million, which is why it's so important. However, this alone is not enough to explain that the difference in market value between the two can more than double.

To understand why, it is necessary to compare other metrics with the previous metrics in addition to the existing metrics applicable to all the functions mentioned above.

For deferred loans, TVL (All information is recorded. The information in this article is only for Ethereum information) and all loans are very important.For some, it represents the business knowledge of the process itself and can also monitor business process processes (debank data).

Abe V2 :

compound

Looking at the comparison above, you can see the fact that the TVLs between the two are not different, but the most important thing is that the AAVE V1 still works. The AAVE volume should be at 8.5b. However, in general, TVLs of two similarities, regardless of model and price.

However, if we look at the pattern of the entire loan, it can be clearly seen as below.V2 X-ray is not compatible and lost in the compounds. To determine the current position of AAVE in the market, you can view the comparison of Blend and AAVE in Dunes as follows:

and this modelAAVE regularly consumes the COMPOUND and MAKER market.You then need to identify why this is happening. Due to the high level of consumer overlap in lending, this also means a certain stock market. Thus, the reasons for increased AAVE are usually twofold:One is for Compound and Maker users to AAVE, and the other is that the "unit price" of AAVE itself has risen sharply.First, let's analyze the number of users to see if AAVE can benefit from the increased number of users.

So let's take a look at our entire user base first. According to data from intotheblock, the total number of current manufacturers is about 254k, the total number of AAVE V1 V2 addresses is about 246k, and the total number of mix addresses reaches 472k, far beyond 'AAVE and Manufacturers.

Of course, the mixture must have the optimal value of the total address or the total address. However, in fact, the joint venture is similar to AAVE, and for a time it changed from AAVE. So, since there's no way to describe an enterprise sharing problem with active addresses, let's look at the number of active users. As below:

Of course, Aave's share of user deduplication is over 50% of the market. And it maintains rapid growth. And the first thing you can see in this picture isAAVE integrated design and actual users of the compound. In particular, since May this year, AAVE and both actual user growth is different.

Seeing this, we have to ask a new question.Why do AAVE users actually grow taller than two?It seems that this problem is partly due to the integration of Flash Loan V2, the new version of AAVE V2 mentioned in the pre-test. As mentioned in previous technology applications, AAVE V2 Flash Loans allows you to directly exchange products. In other words, if a major market event such as 5.19 occurs,Lenders can convert commodities directly into fixed coins to stabilize commodity value, avoid contracts, and reduce losses.At the same time, in these markets, organizations and contracts can use the new Flash Lending to become more competitive and capture the bear market.

Of course, the most important terms of a mortgage agreement are the interest rates on loans and mortgages, and these two interest rates directly affect the interests of the lender and the lender. So, you need to look at the interest rates of Aave and Compound and see if there is a big difference. Defirate provides 30-day average data for the following two loan portfolios:

The amount of the loan:

Mortgage rate:

From the two pictures above, we can see clearly.Aave's personal loan is lower than Compound's.Complex mortgage products have positive value. This is also consistent with the aave uptrend in lending activity seen above.This means that most new Aave users are process borrowers. Combined with the recent economic crisis, there is room for schools and individuals to engage in arbitrage operations, which seems to explain this situation.

Also, if AAVE has its own strengths, it should be in the first place rather than waiting now. So another reason that cannot be ignored isThere is something wrong with the mechanism of Compound and Maker itself.Compund does not have a fallback security module compared to AAVE, so it has more bad debt against cloud marketing.The high interest rates set by the compound have a high starting point for completion, so consumers can easily finish, cause losses, and the situation in 519 can also prove it.From May 17 to May 23, Property realized approximately $260 million in total assets and Abe distributed approximately $310 million in total assets. At the time, Compound and Aave had $10 billion and $13 billion in assets, respectively. In other words, Aave assets now represent 2.3% of total assets and Compound 2.6%. In addition, since the compound itself does not support Flashlon protocol content, it is difficult to reduce losses like Aave.

The director reminds that it is not the heart of the chain, but the location of the manufacturer itself that differs from Aave. However, the current role is similar to that of a central bank.The market carries lower market gold, MakerDao's crime is huge, and the simple yield farming platform is still losing users.With the recent surge in USDC and signs of Dai crossing into the DeFi arena, it's no surprise that this is happening.

Of course, changing users is also a reason to improve AAVE. However, the consensus itself is not wide enough if we do not care about business development. For Mortgage Lenders, Total Loans is a good measure of platform strength and market position, and for AAVE, COMPOUND, and MAKER, our Total Loans exchange rate is based on the following: :

From the image above we can also seeAAVE's total loans nearly doubled in May, making it a leader.This has also allowed AAVE to help users cut their losses when they encounter the bear market identified above. Of course, he can't deny thatThe recent merger of AAVE and Polygon has also increased market interest in AAVE.The situation in the figure above also coincides with the development of blockchain. At the beginning of 2020, when the market continues to decline, in order to find stable income and reduce their own risk, people often choose to borrow Dai or join Maker liquidity mining by planting words to Maker. Market, bearish business people like to buy a lot of Treasuries. As the beef industry emerged from the third quarter of 2020 and the site grew, people turned to profitable products and the creator constantly lost users. It also stems from our understanding of industry rules.

Additionally, throughout the research papers, we find many interesting papers that show significant differences in the loan mix of AAVE and Compound, such as:

AW

Comp :

The comparison table above also shows that AAVE's support for new challenge operations is better. When the market is profitable, many decisions will be made which will lead to an increase in the value of AAVE itself, which for some of the livestock stores in the first quarter of the year This year, AAVE has experienced rapid growth in this regard. happen. But the disadvantages of doing so are obvious,It turns out that the store is very large, AAVE can explode at night.But personally, I think the likelihood of that happening is minimal because of the AAVE security module.

Finally, let's look at the packaging information for both companies and see if we can see the other unknown.

Moreover, it is intuitive that AAVE's packaging industry has grown rapidly due to consumer penetration.The growth of the COMPOUND packaging industry has been slow. This also applies to the total volume of both, after all, the total volume of COMPOUND is higher than that of AAVE.

So far I have tried to explain why AAVE's situation has grown, but I find that its growth in the market is inextricably linked to the reliability of the Flash V2 loan. I think you can do it. Look at the recordings.

A very simple flash loan investment business costs twice as much as a regular loan. It also proves how important flash loans are to AAVE. AAVE's next development will be to pay more attention to AAVE's lending information and strategy.

Contents

You can see that Aave is very fast on many platform libraries. Especially after the release of V2, flash lending has become more powerful and the risk of lenders has increased. At the same time, since debt tokenization is the conversion of debt into tokens in the same liability as convertible bonds, it remains to be seen whether subprime mortgages will be included. However, Aave's target audience is non-human and many of its features are focused on organizations.So speaking also, the system itself is more powerful. 5.19 The Aave market is an important example.

On the other hand, the Aave group respects and has EMI licenses in countries with strict financial regulations, such as the United Kingdom (only coinbase and Revolut have this license before Aave). Additionally, we are trying to expand our scope of business by partnering with existing financial companies (such as partnerships with RealT, a tokenization company), and we are at greater risk. It is one of the most important of the many DeFi projects that are advertised as more than "normal".

It is this law that is hot on the outside and cold on the inside so that ETHLend can come back and Aave can cause trouble.