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ChainAegis: AAVE V2/V3 On-Chain Data Analysis

On January 27th, 2023, the DeFi lending protocol Aave announced that its V3 version had been deployed on the Ethereum network. Ethereum is the first network where Aave has been deployed and it is also the network with the highest liquidity. As of April 28th, the total value locked (TVL) for AAVE V3 on the current Ethereum network has exceeded $1.1 billion, with a borrowing amount of $474 million.

In 2020, DeFi rapidly emerged and many DeFi protocols began to gain popularity, with the TVL rising rapidly. By the end of 2020, the top four DeFi lending protocols were MakerDAO, Aave, Compound, and Venus, with a combined TVL of $6.435 billion. Currently, the protocol with the highest TVL is MakerDAO, with a TVL of $7.377 billion.

Aave is the second-ranked DeFi lending protocol by TVL, with a current TVL of $5.152 billion.

In terms of mainnet deployment, both MakerDAO and Compound are deployed on the Ethereum mainnet, and Compound is also deployed on Polygon. Aave has been deployed on seven public chains, including Ethereum, Polygon, and Avalanche, adopting a multi-chain development model. In addition, Aave was the first project to introduce the concept of flash loans in the DeFi space, allowing people to operate without any collateral to borrow funds. This has made it popular among arbitrage traders and developers seeking to build new DeFi applications.

Aave’s predecessor was ETHLend, which was founded in 2017 as a peer-to-peer lending platform. Later it switched to the fund pool model and was renamed Aave. In January 2020, Aave launched the Aave protocol, providing lending and borrowing services to users who can participate as suppliers or borrowers. With the official launch of Aave, its TVL rose all the way to $2 billion by the end of 2020, up from $300,000. In 2023, Aave also launched the V3 version of the protocol. Here are the highlights of the Aave V2 and V3 upgrades:

In December 2020, Aave V2 was officially launched. Compared to the V1 version, V2 introduced the Yield & Collateral Swap feature to ensure the safety of users’ loan positions and provide the best returns. It also optimized the flash loan function, allowing users to borrow multiple assets in a single transaction. Additionally, V2 added the Local Credit Delegation feature, derived from debt tokenization, which allows users to authorize credit to specific individuals using Aave.

On January 27, 2023, Aave V3 was launched on Ethereum, adopting a flexible architecture that enhances composability and provides more risk management tools. In addition, Aave V3 improved capital efficiency while reducing gas fees by 20%-25%.

Upon the launch of Aave V2 and V3, both versions drove growth in Aave TVL. ChainAegis compared TVL, fees, revenue, users, and on-chain transaction volumes between the two versions.

(1) At the initial launch of Aave V2, TVL rose to $18.4 billion, and after the launch of Aave V3, TVL grew relatively steadily, averaging $900 million per day. However, V3 has not yet reached the same level of TVL as V2.

(2) The daily user count of V3 is approximately 7.69 times that of V2. V2 has a larger user base of users who conduct only one transaction per day, while V3 has more users who frequently access the platform.

(3) After the launch of V3, trading fees on Polygon and Avalanche dropped significantly compared to the V2 version, with decreases of 85.9% and 23.95%, respectively. However, the fee decrease on Ethereum was not significant.

(4) The trading volume of V2 on Polygon is still increasing, but the rate of increase has decreased since the launch of V3. The trading volume and growth rate of V3 are not as good as those of V2.

(5) On Ethereum, liquidity on V2 is gradually migrating to V3, with $329 million already migrated, mainly in mainstream coins such as WETH, WBTC, and stablecoins such as USDC and DAI.

Total Value Locked (TVL)

On October 26, 2021, the TVL of Aave V2 reached its historical high of $18.436 billion, after which it gradually declined to around $4 billion following the Luna hack. Since the launch of the V3 version in March 2022, the daily TVL has been relatively stable, averaging $0.906 billion with gradual growth. In November 2022, there was a slight decrease due to the FTX hack, but it has slowly recovered since then. As of April 25, 2023, the TVL of Aave is $1.284 billion.

Active Users

ChainAegis has conducted statistical analysis on the daily withdrawal, liquidation, repayment, supply, borrowing, and number of individual users for Aave V2 and V3, as shown below:

According to on-chain data, the average daily number of users on Aave V2 and V3 are 1821 and 14006, respectively. It is evident that although Aave V3 was launched after V2, its active user base has already far surpassed that of V2, reaching 7.69 times the number of V2 users. In comparison to V3, the V2 version has a large proportion of users who only make one transaction per day (represented by green in the chart), while in V3, this type of user is not as prominent. In terms of withdrawals (represented by light blue) and deposits (represented by yellow), the V3 version performs more strongly, with the average daily number of withdrawal users being 3.66 times that of V2, and the average daily number of deposit users being 4.93 times that of V2.

On-chain Transaction Fees

The on-chain transaction fees for Aave V2 are mainly on the Ethereum network. After May 2021, the transaction fees on the Ethereum network reached a peak of 14.38 million US dollars.

In March 2022, after the launch of V3 on Polygon and Avalanche, the on-chain transaction fees for Aave V3 significantly decreased. The daily average transaction fees were $12,400 and $20,600 respectively, representing a decrease of 85.9% and 23.95% compared to V2. On January 27, 2023, V3 was launched on Ethereum, and the on-chain transaction fees were not significantly different from the previous few months, with a daily average of $249,300.

Protocol Revenue

After the launch of V2, the monthly revenue of the protocol continued to rise, reaching as high as $6.55 million at one point. However, it was affected by the 2022 bear market and the overall situation was not good, with monthly revenue declining continuously. As of April 1, 2023, the monthly revenue was $737,700.

Polygon on-chain transaction volume

After the launch of V2, the number of on-chain transactions on the Polygon network rapidly increased, reaching a daily average of 7.979 million by December 31, 2021, an increase of 69,249.3 times from the initial launch. The growth rate subsequently slowed down, with an increase of 34.07%. Looking at the trends of transaction volume for V2/V3, the number of transactions and growth rate for V3 are both significantly lower than those of V2, with the current daily average transaction volume being 238.07.

ETH-based Aave V2 to V3 Asset Migration

Ahead of the launch of Aave V3 on Ethereum, a migration tool for V3 was released to help users move their positions from V2 to V3 through a single transaction on the V2 dashboard. According to ChainAegis on-chain monitoring data, the migration of assets from Aave V2 to V3 on the ETH network is steadily increasing. As of April 25th, V2 has migrated assets worth $329 million to V3, with a daily average migration of $170 million.

Based on the token transfer situation, the main tokens being transferred are high-value tokens such as WETH and WBTC, as well as stablecoins such as USDC and DAI. Currently, the largest token being transferred is WETH, with a transfer amount of 162 million US dollars, accounting for 49.24% of the total transferred assets. WBTC ranks second, with a cumulative transfer of 55.509 million US dollars, while USDC ranks third with a cumulative transfer of 49.4635 million US dollars. The cumulative transfer of the latter two tokens accounts for 31.91% of the total transferred assets.

About us

SharkTeam’s vision is to comprehensively protect the security of the Web3 world. The team is composed of experienced security professionals and senior researchers from all over the world. They are proficient in the underlying theory of blockchain and smart contracts, and provide services including smart contract auditing, on-chain analysis, and emergency response. It has established long-term cooperative relationships with key players in various fields of the blockchain ecosystem, such as Polkadot, Moonbeam, polygon, OKC, Huobi Global, imToken, ChainIDE, etc.Official website: https://www.sharkteam.org/Twitter: https://twitter.com/sharkteamorgDiscord: https://discord.gg/jGH9xXCjDZTelegram: https://t.me/sharkteamorg

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