Aave, one of the leading decentralized finance (DeFi) protocols, continues to set the benchmark for the industry. 

More than 30 billion dollars’ worth of assets have been supplied to Aave, and over 11 billion dollars’ worth of assets have been borrowed on the platform. This places Aave among the leaders in the DeFi ecosystem. The platform runs on 13 different blockchains and operates more than 150 markets, making it one of the most scalable and influential decentralized finance actors.

Ethereum is still the core base of Aave’s operations and is still contributing—which is most important—largely to the metrics we track, in particular the count of users, the count of contracts, and then the liquidity that you find within that network. But Aave isn’t just on Ethereum. Aave’s spreading presence across other decentralized networks is fascinating. And some of the metrics we’re tracking are doing some interesting things, particularly in light of the overall market backdrop.

So let’s dive into some of these decentralized tales.

Borrow Ratios Across Chains: Insights into Capital Efficiency and Activity

Aave borrow ratios are a key indicator of activity and capital efficiency across the chains it supports. They are essential because they reveal how much of the supplied liquidity is being utilized for borrowing. And while the Aave team is reimagining borrow ratios and what they signify, it’s safe to say that higher ratios still generally mean that more of the liquidity being supplied is being used for the kinds of things we would want liquidity to be used for: borrowing, lending, and on-chain activity.

Even though the supported chains of Aave have more or less similar borrow ratios, there are a few that are different from the rest and show some interesting trends in DeFi. For instance, Scroll is rapidly making a name for itself with a borrow ratio that’s more than 40%. That means they are making more use of actual liquidity across their ecosystem than a whole bunch of other chains. And it’s not alone in that elevated space. Metis and Ethereum also show borrow ratios that are high enough to be noteworthy.

Aave’s most significant home remains Ethereum, maintaining the largest count of markets and the deepest liquidity. But that doesn’t mean we should overlook the other chains, especially as new entrants like Scroll gain traction and show impressive borrow ratios. Ethereum’s market dominance has now provided a reliable source of liquidity for Aave, but it has also helped establish Aave as one of the most trusted platforms in the DeFi ecosystem.

On the other hand, zkSync has achieved steady growth over the past year, indicating a consistent influx of users likely drawn to its growing set of capabilities and its evident integration into the DeFi space. The unimpeded rise of both solutions clearly demonstrates that Layer 2 is in vogue and that users are now seeking these as substitutes for the main Ethereum chain. The reason is simple: these solutions offer a much greater capacity to execute fast, cheap transactions.

At the same time, Activity Base, which led the previous quarter in utilization, has seen its borrow ratios drop. This is a trend that aligns with the hype that followed the launch of Base, which has since faded. DeFi, as a relatively new and dynamic area of finance, is prone to this kind of price and activity performance. Look out for this phenomenon in the next few quarters as new DeFi platforms launch and old ones seek to invigorate their user bases.

Base’s decline in usage could signal a larger problem for not just Base but also the other chains that have come after it. It could point to the longstanding problem that all new chains face—how to get long-term engagement from users when those users and their liquidity are always looking for the next hot chain. Aave has shifted to three different chains in just the last year, and in that time, it has had to add new tokens to its ecosystem and also get some old ones ready to ship out again—so that’s a lot of adapting. If a platform in the DeFi space isn’t adapting, or if its products aren’t aligning with community needs, then its usage is going to go down.

Aave’s Strategy for Continued Dominance in DeFi

Aave’s significant success and ability to widen its scope across multiple chains is no fluke. The platform has long been centered on giving users access to not just liquidity, but also an expanded set of “financial primitives” that work in a decentralized setting. Since the last time I wrote about Aave, the platform has continued to strengthen its integration with various blockchain networks and keep a close eye on some key metrics that indicate platform health and usability, like borrow ratios, which is what the next section is about.

Aave has a presence on 13 blockchains and in more than 150 markets. It has created a robust and diversified ecosystem that enables it to connect with various communities across the blockchain space. Despite the clear challenges of the 2022 bear market, Aave has maintained a strong, consistent, and growing presence across the Web3 financial sector—managing to stay very much alive when so many projects have fallen by the wayside.

In the rapidly developing world of DeFi, it is vital to keep ahead of emerging trends and have an easily adaptable platform in order to be successful over the long haul. The metrics that Aave generates from its operations across different blockchains give great clues as to what is happening in the DeFi universe. For example, while Ethereum remains a critical platform for Aave, it also borrows from operations on Base in order to stay true to Aave’s DeFi roots; Aave is simply not running on just one chain. DeFi is meant to be universal.

In the future, Aave will track and respond to transformation in borrowing behavior and liquidity across chains with changing trends. The DeFi sector evolves, and with it, Aave stays committed to ensuring top engagement and putting protocols of the kinds you see here in the space. Whether it’s on Ethereum or now-newer networks, Aave looks to remain not just a force but a top-of-mind protocol in DeFi.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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