LEND’s value is also reflecting impressive growth in actual users of the lending protocol and optimism surrounding its Credit Delegation product.
Fundamental Data
LEND FCAS increased 25-points (2.85%) in the past month, driven by a 35-point (3.88%) climb in User Activity. Developer Behavior and Market Maturity also rose 15-points (1.88%) and 23-points (2.73%) respectively.
Recent Events
- The price of LEND has risen by over 3,600% since January 1st, 2020. The major part of the rally occurred over the past seven weeks, after Aave introduced credit delegations in early July. This means any user (A) can delegate their credit line to another user they trust (B). By doing so, user A is able to earn higher undercollateralized lending rates, while user B is able to source liquidity from Aave without a collateral.
- On July 29th, Aave announced it would swap its native LEND token for the new AAVE governance token, in an effort to decentralize ownership of the Ethereum-based money market.
- The team also announced Aave V2 on August 14th, which reduces transaction costs and improves the overall user experience. It provides the ability to swap debt from one currency to another and the ability to swap collateral without returning the loan.
Analysis
Aave is betting on the fact that DeFi will be able to beat interest rates on traditional liquidity sources, such as private placements and bonds. With credit delegation and the launch of v2, Aave is uniquely positioned to provide liquidity for financial debt markets worldwide. The borrowers could be cryptocurrency exchanges, market makers, money lenders, institutions, businesses, NGOs and governments. The money market protocol has already grown to over 1.4 billion market size.
Perspective
Decentralizing ownership of the protocol is key if Aave is to scale. Right now, Aave is the one matching the delegators and the borrowers. As it decentralizes, the vision is that the holders of Aave’s governance token will set up pools where they would seek out entities looking for liquidity options and assess whether they were good credit risks. Then delegators could look at those pools and decide whether to delegate to them.
In the same vein, the Aave team is looking to bring home mortgages to DeFi by tokenizing home equity. Then AAVE holders could vote to accept those home equity tokens as collateral on Aave.
About Aave (LEND)
Aave is a DeFi money market that allows users to earn interest on cryptocurrency and borrow against it. Aave launched its Ethereum-based money market in January 2020 after completing a 2017 initial coin offering (ICO) raising $16.2 million, according to Messari. EthLend originally launched as a peer-to-peer (P2P) lending protocol but switched to a pooled protocol that allows for more dynamic asset listings, network liquidity and variable interest rates.
The platform was one of the first to include the novel decentralized finance (DeFi) product flash loans this past spring. These financial products allow users to make outsized positions on trades without any downside.