Aave elbows US banks aside with record $50b in net deposits

Aave has surpassed $50 billion in crypto deposits, becoming the first DeFi protocol to rival mid-sized U.S. banks in scale.

When it comes to finance, banks have long held the top spots for managing people’s money. Yet Aave, a decentralized finance protocol, has quietly crossed a major milestone that even some banks would envy.

The blockchain-based lending protocol has surpassed $50 billion in net deposits in mid-July, becoming the first DeFi protocol to reach such a scale, a sign of how digital finance is potentially reshaping money management.

To put it in perspective, Aave’s deposits now rival some mid-sized banks in the U.S., according to publicly available Federal Reserve data. For example, Aave ranks just above BOK Financial Corporation and below Umpqua Bank in total deposits, per data from the Federal Statistical Reserve Release.

What is Aave

Built on the Ethereum blockchain, Aave is a DeFi platform that allows people to lend and borrow cryptocurrencies without needing banks or middlemen. Think of it as a global, digital lending marketplace where anyone with internet access can earn interest on their crypto or take out loans by putting up collateral, all done through smart contracts, which are automated, self-executing computer programs.

The word “Aave” means “ghost” in Finnish, symbolizing the somewhat invisible but powerful nature of decentralized finance that operates without traditional institutions. Since its creation, Aave has aimed to make lending and borrowing more widely accessible, transparent, and efficient by cutting out the usual financial gatekeepers.

Kulechov launched the project in 2017 as ETHLend, a peer-to-peer lending marketplace built on Ethereum smart contracts. By 2018, the project had rebranded to Aave, reflecting a broader ambition to evolve into a full-scale open-source liquidity protocol.

Under Kulechov’s leadership, what began as a small group of blockchain enthusiasts grew into one of the most recognized teams in decentralized finance. Aave attracted a global network of developers, investors, and users, all drawn to its mission of potentially reshaping access to financial services.

That mission was driven by a clear problem: the traditional banking system often proves slow, expensive, and out of reach for many, especially those without strong credit histories or access to formal institutions. Aave aimed to offer a decentralized alternative where anyone could lend or borrow assets instantly, without the barriers of paperwork, gatekeepers, or geographic limitations.

How Aave works

By automating lending and borrowing using smart contracts, Aave removes the need for trust in middlemen, lowers costs, and increases speed. Users deposit their crypto assets into Aave’s liquidity pools. These pools act like big communal funds from which borrowers can take loans. In return, lenders earn interest paid by the borrowers. The entire process is secured by blockchain technology, which is designed to make the system transparent and hard to manipulate.

Borrowers need to put up collateral — often more than the loan value — to protect lenders against default. This “overcollateralization” is a key safety feature that aims to help maintain the platform’s stability.

Aave also has its own cryptocurrency called the AAVE token, which serves multiple purposes within the ecosystem:

• Governance: AAVE token holders can vote on proposals that decide how the protocol develops or changes, meaning users have a say in important decisions instead of a single company or group controlling everything.
• Safety Module: The tokens can be staked (locked up) as a safety net. If something goes wrong, this pool of tokens helps cover potential losses, protecting depositors’ funds.
• Discounts and benefits: Using AAVE tokens can grant users lower fees or better terms on the platform.

In late June 2025, Aave expanded to the Aptos blockchain, marking its first move beyond Ethereum-compatible networks, which means traders can now lend, borrow, stake, and use stablecoins like USD Coin (USDC) and Aave (GHO) on Aptos.

Around the same time, the protocol introduced a major update to its risk management system. Aave replaced its old Safety Module with a new mechanism called Umbrella, which automatically uses staked assets like aUSDC or GHO to cover bad debt. The new system allows users to choose which assets they want to stake, offering a more flexible way to potentially protect the platform from losses.

As of press time, Aave is now live on more than a dozen different networks, including Ethereum, Polygon, Avalanche, Arbitrum, Optimism, Base, Fantom, Gnosis, Metis, BNB Chain, and Scroll.