Can Aave make money from a Liquidity Protocol?
Aave (AAVE) is yet another decentralized liquidity that facilitates borrowing or lending while enabling depositors to earn passive income.
As a liquidity protocol, Aave allows users to earn interest and borrow assets with liquidity Aave Markets generate. Each market is a trading platform for a specific cryptocurrency or DAO such as Ethereum (ETH) or Harmony. They claim Aave had $21.447 billion in liquidity locked in Aave across seven networks or 13 markets on 11 April 2022.
The builders claim Aave enables over-collateralized or perpetual borrowing or under-collaterailizated borrowing from one-block liquidity. I think the perpetual borrowing could be popular because it could create permanent lines of credit through Aave.
The Aave Ecosystem
Aave has some projects underway including the Aave Grants DAO. The Grants DAO funds projects with liquidity Aave generates. The Aave community provides grants to developers the Aave community approves.
Similarly, the Aave Risk DAO (decentralized autonomous organization) is a community that reduces risk by providing safe new assets, protocol upgrades, and market monitoring.
Aave serves as the basis of an ecosystem that includes Aave, Zapper, Defi Saver, Zerion, InstaDapp, and DeBank. The Aave Community Treasury funds the ecosystem. They claim the Aave Community Treasury contained $356.950 million on 14 April 2022. The treasury makes money from fees, staking and asset liquidation.
AAVE Specialized Markets
Aave offers a number of specialized markets, including the Aave ARC. The Aave ARC offers institutional grade DeFi with a fully compliant know your customer (KYC) Arc market for institutions, wealth managers, and private funds.
In contrast Harmony, is an open platform for assets collectibles, identity, and governance. Harmony offers secure bridges for cross-chain asset transfers with Ethereum, Binance, and three other blockchains.
Arbitrum is an Ethereum layer 2 or L2 solution that allows fast and secure transactions on Aave and Ethereum. L2 is an extra layer they add to Ethereum to make it faster.
They claim Aave can offer high-volume transactions through the Polygon Network. Aave users can earn Polygon for supplying liquidity and borrowing.
What Value Does Aave (AAVE) have?
Mr. Market gives Aave (AAVE) considerable value. For example, CoinMarketCap named AAVE the 48th largest cryptocurrency, on 14 April 2022.
Moreover, CoinMarketCap gave Aave a $170.75 Coin Price, a $2.338 billion Market Cap, a $2.724 billion Fully Diluted Market Cap, and a $316.407 million 24-Hour Market Volume on 14 April 2022. They based those numbers on a 13.681 million AAVE Circulating Supply, a Maximum Supply of 16 million AAVE, and a Total Supply of 16 million AAVE. CoinMarketCap gave AAVE $13.614 billion billion in Total Locked Value on 14 April 2022.
In contrast, CoinBase estimates Aave a $170.66 Coin price, a $2.3 billion Market Cap, and a $315.9 million 24-Hour Market Cap on 14 April 2022. They based those numbers on a Circulating Supply of 13.7 million AAVE. I consider Aave a highly unstable cryptocurrency because CoinBase gave AAVE an all-time high Coin Price of $666.86.
If you are looking for a liquidity protocol, that could make money. I think you need to investigate Aave. Think Aave could make money because it has locked value and offers assets people could actually use.