AAVE
The largest onchain lending protocol, offering pooled liquidity for crypto lending, borrowing, and the GHO stablecoin.
Aave is a non-custodial money market where suppliers deposit into shared liquidity pools and borrowers take over-collateralized loans at algorithmic rates. V3 uses a monolithic per-chain pool with isolation mode and e-mode for correlated assets, while V4 introduces a hub-and-spoke architecture that separates shared liquidity from isolated borrow markets. It is the default venue for institutional-scale onchain credit and for GHO, Aave's native overcollateralized stablecoin.
- Aave V3 remains the dominant deployment, with parent-protocol TVL around $14.5B in May 2026 per DeFiLlama, down from a November 2025 peak near $30B.
- Live across 20+ networks including Ethereum, Arbitrum, Base, Avalanche, Optimism, Polygon, Linea, Plasma, and Aptos (the first non-EVM deployment, written in Move).
- Aave V4 launched on Ethereum mainnet on March 30, 2026 with three market hubs (Core, Prime, Plus) and expanded to Avalanche in July 2026 with a $15M incentive program; introduces a Liquidity Hub with Spokes and native GHO minting on any Spoke.
- E-mode allows LTVs up to 93–97% on correlated pairs (e.g. wstETH/ETH), the highest in mainstream pool-based lending.
- Audited by OpenZeppelin, Trail of Bits, Certora (formal verification), SigmaPrime, and ABDK; backed by a Safety Module of staked AAVE, stkGHO and stkABPT.
Frequently asked questions
What is the difference between Aave V3 and Aave V4?
V3 is one monolithic pool per chain with per-asset risk parameters, isolation mode, and e-mode. V4 replaces that model with a Liquidity Hub plus Spokes: a shared liquidity layer per network feeds isolated borrow markets whose LTV and asset lists can be tuned independently. V4 also makes GHO mintable from any Spoke and moves toward cross-chain liquidity fungibility via Chainlink CCIP.
How does Aave set interest rates?
Rates are algorithmic and driven by real-time utilization of each asset pool. Below the kink (target utilization), rates rise gently; above it, they steepen sharply to bring borrowers off and pull suppliers in. Each asset has its own rate curve set by governance, and rates update on every interaction rather than on a schedule.
Is Aave safe? What happens if there is bad debt?
Aave's smart contracts are among the most audited in DeFi and have run since 2020 without a protocol-level exploit. Bad debt is absorbed first by protocol reserves and, if those are exhausted, by the Safety Module, where stakers of AAVE, GHO, and ABPT can be slashed up to a governance-defined cap. The April 2026 KelpDAO rsETH incident, in which fake collateral was minted via a bridge exploit, produced material bad debt on Aave and demonstrated the residual risk of accepting bridged assets as collateral.