Aave’s growth is fueled by increased leverage demand and a surge in monthly active users. The protocol is also expanding its integration with Layer 2 networks and preparing to launch a major upgrade in mid-2025.
The start of the year marked a new milestone for the Aave lending protocol, as its net deposits reached an all-time high of $35 billion, surpassing levels seen during the 2021 bull market.
This remarkable growth can be explained by a few seperate factors, including increased demand for leverage and an overall bullish market sentiment. However, it’s also evident that Aave, compared to 2021, has fundamentally strengthened and become more deeply integrated into the crypto DeFi ecosystem.
The project remains the top lending market in the DeFi space, with an impressive market share of around 42%.
In 2024 and early 2025, the number of monthly active users has consistently exceeded the peaks of 2021. While Aave saw approximately 60,000 monthly active users during its 2021 peak, this figure has now stabilized around 100,000.
Ethereum Layer 1 remains the dominant chain for Aave, hosting over $28 billion (80%) in net deposits. However, with the rapid development of Layer 2 (L2) solutions, the moment when L2 networks surpass Ethereum Layer 1 may not be far off.
Over the past few years, Aave has launched on several major L2 networks and even on blockchains outside the Ethereum ecosystem. These include Base, Arbitrum, Optimism, Polygon, Avalanche, and others. Collectively, these networks now contribute over $7 billion in net deposits to the protocol. The “L2 strategy” has significantly boosted the protocol’s user base and extended its reach within the DeFi space.
When it comes to assets, Ethereum (including its wrapped and liquid staking derivatives) and stablecoins remain the most popular on the platform. In fact, nearly half of Aave’s net deposits are tied to Ethereum and its derivatives, followed by stablecoins like USDT, USDC, and USDe, alongside other assets.
Despite its already impressive achievements, Aave continues to innovate. The protocol is currently working on its v4 release, expected in mid-2025. One of the key features of this upgrade is the Unified Liquidity Layer, designed to address fragmented liquidity issues in earlier versions. This enhancement will consolidate liquidity across protocols, creating a unified pool rather than separate pools for different networks.
The v4 upgrade and Unified Liquidity Layer will completely change how Aave works. Before v4, Aave had different versions, like V2 and V3, that operated in siloed environments. With v4, Aave is rethinking its design: the Unified Liquidity Layer will function independently from the modules built on top of it.
The Unified Liquidity Layer will bring all the liquidity from Aave’s markets together, making the ecosystem smoother and more efficient. At the same time, developers will have the freedom to create specialized modules, like a liquidation module or a borrow module. These modules won’t interfere with the entire liquidity pool and can easily plug into the unified layer, making the system more flexible and scalable.
Despite Aave’s significant growth, its token is still trading below its all-time high. However, token holders are hopeful for the approval of the proposed "fee switch," which would distribute protocol fees to stakers. In the last 30 days alone, Aave generated $82 million in fees. If these earnings were shared, it could boost demand and potentially drive up the price of $AAVE.