A Deep Dive into Aave

Pioneering Decentralised Finance

We continue to be highly impressed by the team at Aave. Their track record is superb, and their vision compelling. In the attached research piece, Jake and Ali take a detailed look at this emerging decentralised finance giant.

Executive Summary

Aave is a leading decentralised finance (DeFi) protocol, transforming lending, borrowing, and asset management on blockchain networks. Since its inception in 2017, Aave has evolved into a global powerhouse, managing around $60 billion[1] in total value locked (TVL). Its non-custodial platform eliminates intermediaries, offering innovative tools like flash loans and flexible interest rates, delivering unparalleled speed and accessibility compared to traditional finance.

Aave addresses a key opportunity: democratising financial services through decentralisation. Its diversified revenue streams have generated over $339 million in H1 20251. Serving retail investors, institutions, and developers who are attracted by its utility in yield enhancement and capital access. We believe that valuation metrics, such as an FDV/TVL ratio of 0.07x and an FDV/Fee ratio of 5.51x, indicate that Aave’s potential is undervalued by the market.

The V4 upgrade will introduce Smart Accounts and real-world asset integration, boosting efficiency and institutional appeal. Supportive U.S. legislation, like The GENIUS Act’s legitimisation of stablecoins, could drive broader adoption, benefiting Aave as a key DeFi platform.

Competitively, Aave outperforms banks in loan speed (minutes vs. weeks) and lending yields (3.72% for USDC[2] vs. the national average bank savings rate of 0.56%[3] ), though it contends with volatility and technical barriers.

Aave’s innovative design, robust financials, and strategic roadmap make it a bridge between DeFi and traditional finance. With significant growth, an undervalued token, and regulatory tailwinds, Aave offers a compelling investment opportunity.

This is what the next generation of decentralised finance looks like, and Aave has been a consistent leader in the space.

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