Aave vs Compound: Comparing The Two DeFi Lending and Borrowing Platform

The world had already turned a new page when Bitcoin was first introduced to the masses, back on 2009 by someone who is anonymously knows as Satoshi Nakamoto; however, it was a whole another genre, when that led to the invention of DeFi or decentralised finance with use cases of DeFi Lending or DeFi borrowing! That being said, the two of the most talked about lending platforms in the DeFi space are the two coins this article is about; Compound and Aave. But first;

What is DeFi Lending?

DeFi Lending is an option that is usually platform based. It is where investors can get access to loans without any involvement from a third party. Not only do they have a process set for loans without any involvement from a third-party, but also has an option to enlist their crypto tokens for lending purposes!

However distinct strategies and approaches, Compound and Aave allows users to use various crypto assets for lending and borrowing.

Read more: Top DeFi Projects 2023

What is Aave?

AAVE is a decentralized protocol; which users can use to lend and borrow crypto assets of their own at a specific interest rate without having to go through a centralized intermediary. The Aave network is one of the largest lenders of crypto and the AAVE token has a larger market cap than its rivals; which are Maker or Compound.

As with all DeFi, the main aim for Aave is to solve the most pressing issue of traditional lending services, which is to find a solution to convert centralized financial services to equivalent decentralized. Previously in a standard lending case, the bank lends out the users funds and gets profited, and as a result the users never had access to these interest earnings.

AAVE have solved this problem in their system. Anyone can lend out their own money(crypto) without permission and trust other users; the interest earned by your assets is pain directly to your network wallet.

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Unique Features of Aave (AAVE):

• Open-source – generally open source is more secure because it has gone through different and intense peer reviews by the community.
• Non-Custodial Protocol – AAVE never holds your currency (Crypto) directly , less chance to hack because there are no wallet system for users.
• Control without ownership – it allows the borrower to gain exposure to different crypto without owning it.

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Latest Aave News:

• The recent AIP proposal have presented Aave with the opportunity to onboard Aave-Chan Initiative or ACI, as a service provider for the Aave protocol. This proposal aims to secure the necessary resources in order to continue the ACI’s work.

This [AIP] is now live and presents the Aave community with the opportunity to onboard Aave-Chan Initiative (ACI) as a service provider.https://t.co/p6gSNHtFeD

— Aave (@AaveAave) April 14, 2023

• A proposal from the community to deploy the decentralized exchange (DEX) Aave on the zkSync Era Mainnet has been passed with overwhelming support from the Aave community.

A [Temp Check] is currently running to deploy Aave V3 on the @zksync Era Mainnet, expanding Aave’s presence and tapping into the growing zkEVM ecosystem.https://t.co/ps1RMl7Sva

— Aave (@AaveAave) April 14, 2023

Additional read: Uniswap vs Aave

Compound (COMP) vs Aave (AAVE): A Comparative Analysis

	Compound	Aave
Launch Date	2017	2017
Founder	Robert Leshner and Geoffrey Hayes	Stani Kulechov
Blockchain Protocol	Ethereum	Ethereum
Native Token	COMP	AAVE
Token Type	ERC-20	ERC-20
Market Capitalization	$335,988,775	$1,164,824,922
Circulating Supply	7,267,152 COMP	14,093,193 AAVE
Max Supply	10,000,000	16,000,000
Consensus Method	Proof of Stake	Proof of Stake

What is Compound?

The users in the Compound can be categorized as one of the following: 

1) Borrowers: These are the users who borrow a crypto asset by posting some other crypto as collateral on Compound. Users are allowed to borrow crypto tokens at a percentage of the posted value. 

2) Lenders: These are the users who want to earn interest on their crypto assets and thus they deposit their crypto assets to the lending pools of the Compound from which the borrowers can borrow. 

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Unique Features of Compound (COMP):

• It enables its users to earn compound interest by contributing assets to its liquidity pool. 
• The compound interest rates that the platform offers are dynamic and it automatically changes based on the demand and supply for the item. 
• The collateral can be paid anytime and can be withdrawn anytime because there is no lock-in period. The funds that are deposited in the Compound are routed through smart contracts and this ensures that the lenders retain ownership of their assets. 

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Latest Compound News:

• Back in August 2022, one of the oldest DeFi lending protocol Compound, launched Compound III; which is an EVM compatible protocol, enabling the supply of crypto assets as collateral in order to borrow the base asset.

The Compound Digest: Compound III product updates, grows to ~$650M in total assets https://t.co/iMzOXQBkjz

— Compound Labs (@compoundfinance) March 30, 2023

Read on: Total Value Locked Explained and Top TVL Tokens

Pros and Cons of Compound vs Aave

Pros

Compound	Aave
Compound Finance has a token-based governance system which allows token holders to vote on the direction of the platform.	There is no requirement for identity verification
The network supports lending and borrowing of multiple assets, which includes Ethereum and other ERC-20 tokens.	Aave network’s governance, being decentralized and community-driven, allow the token holders to vote on the changes to the platform.
Users does not need to have a credit check in order to lend or borrow assets on COMP.	The flash loans feature allows uses to take and repay the loan within a single transaction block.

Cons

Compound	Aave
While Compound Finance allows users to borrow and lend assets to earn interest, the user are sometimes exposed to the risk of impermanent loss.	The lack of supply or demand for a particular asset can lead to a lack of liquidity.
It has a more complex system as compared to other lending platforms, which might make it a little difficult for new users to grasp.	Having been built on the Ethereum blockchain, Aave can experience slower transaction times and higher gas fees during periods of high network congestion.
Being built on smart contracts, there is a risk of bugs or errors that could lead to the loss of user assets.	There is a lack of oversight and protection for users, as being a decentralized platform Aave operates outside traditional financial regulations.

Aave Price Prediction 2023

• The AAVE price today is running at $81.08, with a 24-hour trading volume of $65,345,862. The price has seen a drop in its price by about 0.16% in the last 24 hours. The market cap of Aave is standing at $1,141,198,174, as of April 19, 2023.
• The triangle shows that AAVE is still in its $81 mark and is looking for a potential push to keep up the trend to break through its resistance to touch the $85 levels soon.
• Given Aave breaks the $80 cycle, it has the potential to reach a valuation of $95 by the end of 2023.

Compound Price Prediction 2023

• The COMP price today is running at $45.66, with a 24-hour trading volume of $24,834,729. The price has seen a drop in its price by about 2.12% in the last 24 hours. The market cap of COMP is standing at $331,227,831, as of April 19, 2023.
• Given the upgrades that are set in place for Compound III, the crypto asset has the potential to break through its $45 cycle and reach the $50 mark by the end of 2023.
• The MA in the graph shows a possibility if the next 24 hour trading volume to go back to the $46 levels by the end of the week.

COMP vs AAVE: Which Is The Better Buy?

Both Aave and Compound are one of the well known DeFi lending platforms which allow users to lend and borrow a variety of crypto assets. While both the platforms have unique features and functionalities that makes them some of the highest TVL garnering crypto projects, the best platform between them for various users depends on the specific needs and preferences of the individual.

On one hand, AAVE provides an option flash loans, which means that users can take the loan and repay it within a single transaction block; while on the other hand, Compound provides a token-based governance system wherein token holders has the option to vote on the direction of the platform.

Additionally, Aave as a decentralized governance system allows token holders to vote on changes that are to be deployed on the platform. While Compound has a dynamic interest rates that is determined by the supply and demand of the assets in the lending pools.

While the advantages are evident, both AAVE and COMP decentralized platforms operates outside of the traditional financial regulations, which makes the networks have a lack of oversight and protection for users. Thus, it is imperative to conduct one’s own research to understand the tokens thoroughly before investing.

How to Invest in Compound and Aave 

Investing in crypto is super simple, safe, and secured with CoinDCX app. It does not matter whether you want to buy COMP or wish to trade AAVE price today, we have got you covered.

Here are the 3 simple steps to buy your first COMP or AAVE with CoinDCX.

1. Sign up on CoinDCX
2. Complete your KYC
3. Link your bank details
4. Buy Compound (COMP) or Buy Aave (AAVE)