Aave

💡 Aave is a decentralized liquidity protocol where users can borrow and lend crypto assets

Type:

DeFi

Token Strength

Token Utility:

- The Aave token has two key utilities: governance and staking. - Holder can vote on allocation of treasury funds, risk parameters change and the amount of tokens issued etc. - Holders can also stake their tokens into the Safety Module (SM) to provide funds that can be used to secure the protocol in exchange for a reward paid in Aave tokens.

Demand Driver:

- The utilities of the token (governance and staking) and discussions to add more utility to the token on the governance forum, which makes the token more speculative. - But the staking rate is still low relative to the circulating supply and it only pays out the native token. Also, the protocol does not redistribute much of the fees it creates to its users like Curve.

Value Capture:

- Earned from charging lending and borrowing's fee plus the fees from flash loans are deposited (0.09%). - These funds are governed by Aave token holders. It’s worth mentioning that the value captured by fees is reflected in the token by governance rights.

Value Creation:

- Lend and borrow funds with higher capital efficiency and lower cost - No KYC, minimum deposit, or country restrictions

Our Take

Aave token does not directly capture the value the protocol create
Utility does not create enough demand while future utility creates speculative opportunity
Already emitted 88% of total supply and about 25% of total supply is staked
Current staking APY for Aave is 6.44% (adjusted APY 5.2%)
It is the biggest in lending and borrowing market