Aave, a decentralized finance (DeFi) loan protocol, continues its impressive ascent as the company has now crossed a significant milestone. The company’s loan growth has also helped boost its asset price, as its LEND token has grown by over 500 percent in the past two months.
Aave on the Rise
According to data from DeFI Pulse, Aave’s flash loans have increased tremendously over the past month. Daily loans have grown by over 1,000 percent — from about $11 million at the beginning of the month to about $130 million. DeFi Pulse adds that Aave is now the fourth-largest DeFi protocol, with about $392 million in capital now locked in the projects.
As for LEND, the growth of its parent company has also helped it to surge. The asset crossed the $0.3 price peg recently, becoming the 34th-largest digital asset with a market cap of $362 million.
Aave is tapping into what appears to be an opportunistic market with its so-called “flash loans.” The company describes them as the first “uncollateralized DeFi loan option,” with borrowers able to access funds as long as they return the liquidity to the pool within a transaction block.
Users who fail to pay back will find their loans reversed entirely to undo their actions. This way, Aave believes that it can protect the funds in its reserve pool.
Underlying Growth for DeFi
Aave’s growth is in line with the broader DeFi sector, which has so far managed to exceed analysts; expectations. The sub-industry broke out this year and has been on a significant surge. Despite the warnings that we could be seeing a bubble akin to that of the mainstream crypto sector in 2017, DeFi projects have continued their impressive surge.
In 2020, the DeFi space achieved a significant expansion. It passed a significant milestone in February when the total value of tokens locked in DeFi projects crossed the $1 billion thresholds.
While the industry saw a bit of a decline in March from the sell-off, this wasn’t an isolated event. The crypto space suffered a downturn for two weeks, while the larger financial space sputtered on for months. Like the crypto space, however, DeFi has managed to bounce back. Today, the total value of tokens locked in DeFi stands at $3.7 billion.
The growth has been spurred significantly by the lending protocols. Maker, still the largest DeFi lending protocol, currently holds the top DeFi spot and accounts for about 29 percent of the entire DeFi marketplace. Lending protocols make up four of the top five DeFi projects in the crypto industry. As DeFi Pulse notes, third-ranked Synthetix, a derivatives protocol, is the only exception to this.
DeFi’s rise has also drawn attention from some top institutional firms. The Chicago DeFi Alliance comprises several institutional firms committed to helping the development of the space. These firms include CMT Digital, Arca, and TD Ameritrade. All involved firms have pushed for improved DeFi regulation and development, as they believe it to be the next frontier in financial innovation.