- Aave has reclaimed its spot as the second-largest DeFi protocol in terms of TVL.
- MakerDAO has seen a decline in TVL since it slashed its DAI Savings Rate (DSR) by 3%.
Decentralized lending platform Aave [AAVE] has regained its position as the protocol with the second-highest DeFi TVL after a period of decline following Curve Finance’s [CRV] hack in July.
Source: DefiLlama
According to data from DefiLlama, Aave’s TVL currently stands at $4.72 billion, putting it just behind the Ethereum-based liquid staking platform Lido Finance [LDO].
Is your portfolio green? Check out the AAVE Profit Calculator
MakerDAO’s brief stint at the “top”
On 30 July, Curve Finance suffered a reentrancy hack through which an attacker exploited a vulnerability in the protocol’s code to steal about $73.5 million worth of crypto assets.
Before the hack, Curve’s founder Michael Egorov, had used some of his CRV holdings as collateral to borrow from various lending protocols, with the largest loan taken from Aave (over $100 million).
Mich confirming hacker got the large CRV pool.
That's probably enough CRV to push Mich's $100M+ of CRV into liquidation on Aave, Inverse and Abracadabra if its not absorbed.
This is going to be nasty for those protocols and for Curve.
Can rebuild but possibly brace for impact https://t.co/5LHPE8jXxt
— Adam Cochran (adamscochran.eth) (@adamscochran) July 30, 2023
After the hack, the price of CRV plummeted, raising fears that Egorov’s loan would be liquidated. Egorov would have had to sell more CRV to avoid liquidation, which would have further depressed the price and potentially led to a contagion effect on Aave.
Update:
The #Curvefi founder(Michale Egorov) sold a total of 142.6M $CRV to 30 institutions/investors via OTC at a price of $0.4 and received $57M to repay the debts.
He currently has 269.8M $CRV($166M) in collateral and $48.7M in debt on 4 platforms.https://t.co/8ozY1y5KrO pic.twitter.com/ITA08Fuf4f
— Lookonchain (@lookonchain) August 6, 2023
The details
In anticipation of a contagion effect, many liquidity providers withdrew their funds from Aave, resulting in a decline in the protocol’s TVL and a drop in the price of the AAVE token. For context, within the seven days that followed the hack, Aave’s TVL plummeted by 15%.
As liquidity providers and borrowers flocked to MakerDAO [MKR], its wrapped staked Ether tokens (wsETH) deposits climbed, causing its TVL to surge, thereby replacing Aave as the second-largest DeFi protocol in terms of TVL.
To keep the traction going, MakerDAO amplified its Dai Savings Rate (DSR) to 8% on 1 August, and within seven days, the total amount of the DAI stablecoin deposited in the DSR contract jumped from 339.4 million to 556 million, according to Makerburn.com data.
Soon after, a proposal was passed to reduce the DSR to 5%, forcing a number of whales to remove previously provided liquidity from the DSR pool. For example, Tron founder Justin Sun withdrew 206 million in DAI and 235,556 WSTETH from the pool.
This resulted in a decline in the protocol’s TVL. According to data from DefiLlama, MakerDAO’s TVL has dropped by 9% in the last month.
How much are 1,10,100 AAVEs worth today?
AAVE sees new demand
Trading at $62.07 at press time, AAVE’s price has jumped by 10% in the last month, data from CoinMarketCap showed. This has been due to an uptick in new demand for the DeFi token. According to data from Santiment, the daily count of new addresses created to trade AAVE has risen by 20% since 9 September.
Likewise, the number of addresses involved in AAVE transactions daily has since rallied by 6%.
Source: Santiment
