• AAVE is the leading DeFi lending protocol with a Total Value Locked (TVL) of $17 billion in tokens
• DeFi protocols across the board are faced with a similar dilemma of sustaining their explosive growth in a complex system.
• AAVE integrated with Polygon to bypass high fees and make DeFi accessible to a broader audience
• DeFi is a technological breakthrough that should not be ignored by U.S. regulators.

After the DeFi summer of 2020, the TVL of DeFI projects increased from a mere $1 billion to $88 billion. The current value is $54 billion, with more than a handful of protocols challenge market dominance. AAVE is the leading non-custodial liquidity protocol with a lending value locked of $10 billion. AAVE is on the cusp of increasing its market dominance through multi-chain integrations.

AAVE Gets Noticed

Expansion of DeFi into the mainstream is reflected in the number of centralized institutions granting access for token holders to interact with their systems. AAVE’s status as the leading open-source lending protocol annexed itself to a mainstream market.

A recent Twitter poll by Revolut highlighted 61.6% of the responders believed AAVE would be available in apps trading platforms. Additionally, digital wallet and trading platform Blockchain.com included AAVE in their system, allowing users to gain 8% API interest on their deposits.

Similarly, Swiss Sygnum Bank offers institutional-grade investors prime access to decentralized applications. AAVE, Uniswap, and 1Inch are among the tokens functioning under the DeFi umbrella. Furthermore, Stani Kulechov, AAVE’s CEO, highlighted that institutional adherence opportunities “make it easier for clients to onboard to the digital asset ecosystem.”

On the Flipside

• The TVL of DeFi protocols decreased, with Bitcoin losing 50% of its all-time high value.
• Users need to trust the platforms they are staking or lending to increase adoption for Layer 2 DeFi protocols.
• The competitive nature of the DeFi space entails that only a few protocols will become successful in the field and reach mass adoption.

Scaling to Increase Integrations

AAVE diverted from their native Ethereum platform by partnering with Polygon (Matic) to make DeFi more accessible to users by decreasing transaction costs. AAVE’s Marc Zeller argued that $20-$30 fees for deposits are not ok for regular consumers. Additionally, layer two fees, which amount to $5, are similarly unsustainable.

The DeFi summer of 2020 proved both beneficial and problematic for AAVE and other DeFi platforms as it highlighted mainstream adoption issues. Integrating with Polygon made DeFi interactions more cost-efficient, as it aided in increasing the ecosystem’s value.

Furthermore, RabbitHole received a $50,000 grant from the AAVE DAO to incentivize users to “make deposits” on the Polygon network. In addition, the incentive, which offers participants rewards valuing $40,000, and an NFT has the scope of increasing ecosystem adoption. As argued by Mark Cuban, DeFi focuses on increasing profitability for both developers as well as users.

AAVE and Increasing Community Support 

Marc Zeller discussed AAVE is aiming to become a middleware protocol for other applications and services to build on top of AAVE. Additionally, Stani Kulechov emphasized that the protocol must innovate to be ahead of the market demands.

In that regard, he believes “multi-asset and multi-governance” is the apparent step forward, including community members for decision making. Furthermore, Kulechov argues that being experimental in a highly competitive field is the only way to incentivize adoption and usability. 

Adoption and awareness are built on community dedication. Marc Zeller emphasizes using communications such as memes to fit their target audience, making both the protocol and their image appealing to the end-user.