Aave Protocol Eclipses MakerDAO to Become Top DeFi Asset in Terms of TVL
Aave (LEND) has garnered the attention of the DeFi market with a steep rise in the TVL (total value locked), surpassing MakerDAO to become the preferred place for Ethereum based tokens.
As per the data provided by DeFi Pulse, the total value of tokens locked in Aave is worth $1.44 billion, pushing behind Maker’s TVL of $1.42 billion.
Compound, which was at the top of the DeFi list until a few weeks before, has fallen to fifth place and Curve and yEarn has risen to prominence.
Aave, in contrast to its nearest competitor Compound, is not carrying out liquidity mining that could cause overestimated figures.
The platform facilitates borrowing and depositing a number of cryptos, with stablcoins such as TrueUSD (TUSD), Tether (USDT), and USD Coin (USDC) contributing to major share of value locked.
LEND is one of the assets that is made available, and commands $461 million in TVL. The token has been continuously on a rise for the past 90 days, taking the market cap to $900 million.
It is one of the primary reasons for Aave to pushback Maker and take the top place. The token gained another 20% yesterday.
The rise in value of TVL is correlated with the price of the token, explaining the reason for Aave to take the top ranking.
TVL is a measure that has come under heavy criticism as it is mostly used as a shortcut to weigh the popularity of a protocol and arrive at a valuation.
Nevertheless, incentives for liquidity mining on Curve or Compound gave rise to yield farming concept, which propels TVL in tandem with token appreciation.
Another important drawback is that the value is not locked in literal sense as tokens can be removed for use in other projects or even better yielding ventures.
Additionally, the dollar value of the TVL is straightaway dependent on the valuation of assets placed, as in case of LEND.
Some academics have underlined that the total TVL of the market is being doubly valued. For instance, DAI liquidity of any kind on a lending protocol like Aave is derived through counting the value of actual assets, offered as collateral to Maker to create the stablecoin, for the second time.
Even though these problems have encourage some investors to suggest alternative ways of calculating the performance of DeFi assets, the metric still stays as the popularly cited among crypto investors.