Aave pushes US banks aside with net deposits of a record $50 billion.
Banks have historically been the leading financial institutions for handling people’s money. Even some banks would be jealous of the significant milestone that Aave, a decentralized finance protocol, has subtly reached.
As evidence of how digital finance may be changing money management, the blockchain-based lending protocol became the first DeFi protocol to hit $50 billion in net deposits in mid-July.
To put it in perspective, publicly accessible Federal Reserve statistics shows that Aave’s deposits now rival those of some mid-sized banks in the United States. For instance, according to data from the Federal Statistical Reserve Release, Aave has slightly more deposits than BOK Financial Corporation and fewer than Umpqua Bank.
What is Aave
Aave is a DeFi platform that was developed on the Ethereum blockchain and enables cryptocurrency lending and borrowing without the use of banks or intermediaries. Imagine it as a worldwide digital lending marketplace where anyone with internet access can use smart contracts—automated, self-executing computer programs—to take out loans by putting up collateral or earn interest on their cryptocurrency.
The Finnish word “Aave,” which means “ghost,” represents the sometimes imperceptible yet potent character of decentralized finance that functions independently of conventional institutions. By eliminating the traditional financial gatekeepers, Aave has sought to increase lending and borrowing’s accessibility, transparency, and efficiency since its founding.
Using Ethereum smart contracts, Kulechov started the initiative in 2017 as ETHLend, a peer-to-peer lending platform. The project changed its name to Aave by 2018, indicating a larger goal to develop into a comprehensive open-source liquidity protocol.
What started off as a small group of blockchain enthusiasts became one of the most well-known teams in decentralized finance under Kulechov’s direction. Because of its promise to transform access to financial services, Aave has garnered a global network of developers, investors, and users.
The traditional banking system frequently proves to be slow, costly, and unaffordable for many people, particularly those without solid credit records or access to formal institutions. This objective was motivated by a clear problem. By eliminating the need for paperwork, gatekeepers, or geographical restrictions, Aave sought to provide a decentralized alternative where anybody could lend or borrow assets quickly.
How Aave works
Aave reduces costs, speeds up, and eliminates the need to trust middlemen by automating lending and borrowing with smart contracts. Users fund Aave’s liquidity pools using their cryptocurrency holdings. Borrowers can obtain loans from these pools, which function as sizable communal funds. Lenders receive interest from borrowers in exchange. Blockchain technology, which is intended to make the system transparent and difficult to manipulate, secures the entire process.
To safeguard lenders against default, borrowers must provide collateral, frequently over the loan amount. One important safety element that attempts to preserve the platform’s stability is “overcollateralization.”
Aave also has its own cryptocurrency called the AAVE token, which serves multiple purposes within the ecosystem:
Governance: Users have a say in significant choices rather than a single organization or group controlling everything because AAVE token holders can vote on ideas that determine how the protocol evolves or changes.
Safety Module: As a safeguard, the tokens can be staked, or locked up. This token pool helps protect depositors’ money by covering possible losses in the event of an emergency.
Benefits and discounts: Users that use AAVE tokens may be eligible for improved terms or reduced fees on the platform.
Aave made its first foray outside of Ethereum-compatible networks in late June 2025 when it extended to the Aptos blockchain. This means that traders can now lend, borrow, stake, and use stablecoins like USD Coin (USDC) and Aave (GHO) on Aptos.
At about the same time, the protocol’s risk management system underwent a significant modification. A new system called Umbrella, which automatically leverages staked assets like aUSDC or GHO to pay bad debt, took the role of Aave’s outdated Safety Module. The new system gives users more flexibility in deciding which assets to stake, potentially protecting the platform from losses.
More than a dozen networks, including Ethereum, Polygon, Avalanche, Arbitrum, Optimism, Base, Fantom, Gnosis, Metis, BNB Chain, and Scroll, have Aave operational as of this writing.
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