Blue Chip DeFi New Narrative: Disc Aave and Compound

[DearMary]

Recently, the narrative of real-world asset tokenization (RWA) triggered a surge in the price of Compound's token COMP, following the announcement of a new company by Compound founder Robert focusing on the U.S. debt chain. This article focuses on Aave and Compound, two leading DeFi lending agreements, reviewing their lending business, token emissions, and protocol revenue and expenditure.

Product Fundamentals:

1. Lending Business:

Aave is currently the largest DeFi lending agreement, being 2.6 times larger than Compound. Compound introduced the capital pool mode of lending but lacks follow-up development. In contrast, Aave seized the opportunity of multi-chain development and has an innovative approach.

Both protocols employ risk isolation measures, with Compound's approach being more radical, while Aave aims to be an all-purpose lending agreement to grab more market share.

2. Token Demand and Emissions:

Aave has a total of 16 million tokens, with 90.52% in circulation. Its main use cases are governance and pledge. On the other hand, Compound's COMP token has a total of 10 million tokens, with 68.56% in circulation. COMP is primarily used for governance and as a liquidity incentive in the lending market.

3. Agreement Revenue and Expenditure:

Aave's revenue sources are diversified, including deposit and loan spreads, flash loan fees, GHO coin income, and more. Although the revenue has fluctuated over time, it currently covers the token incentive spending.

Compound's revenue source is relatively simple, and it introduced the borrowing and mining model with a strong token incentive. The protocol is still subsidized by COMP tokens, and its revenue is far from covering the token incentive spending.

Conclusion:

Aave and Compound are leading DeFi lending agreements, but Aave has been more proactive in seizing opportunities and expanding its market share. The two protocols have different token incentive models and revenue sources. While Aave's revenue currently covers its expenses, Compound continues to rely on COMP token subsidies. Understanding these key points can provide valuable insights into the performance and potential of these blue-chip DeFi protocols.