Aave
Liquidity & collateral
History, architecture and utility
Aave grew from ETHLend into pooled lending infrastructure. Its deployments use the consensus of their host chains rather than an independent Aave blockchain. The AAVE token’s initial migration supply was 16 million; that figure is not a live circulating-supply measurement. Here, lending mechanics refer specifically to V3.
Follow the chapters below to examine the mechanisms, supply, upgrades, ecosystem and risks. The asset’s usefulness does not guarantee a market price or an investment return.
Inside the system
Aave lending pools and aTokens
Aave is a liquidity protocol deployed on multiple networks.
DeFi interest rates: APR and APY
Borrower interest funds supplier returns, after protocol allocations.
Collateral, LTV and liquidation thresholds
Loan-to-value limits the amount that can initially be borrowed against collateral.
Aave health factor and liquidation
The health factor is threshold-weighted collateral value divided by total debt value.
E-mode, isolation and flash loans
Efficiency mode permits parameter arrangements for defined groups of correlated assets.
AAVE governance and protocol risk
AAVE is associated with ecosystem governance, including decisions about supported assets, risk parameters and protocol evolution.
Your debt stays. Your collateral moves.
Start with $10,000 of collateral and $6,000 of debt. Move the collateral price and watch the margin change.
Above 1 in this model. That is a margin, not a guarantee.
Assumptions and calculation
Health factor = collateral value × liquidation threshold ÷ debt. One collateral asset, an illustrative fixed threshold of 80%, constant debt value and no interest or fees. The boundary is reached at a 25% collateral fall; below 1, the position is eligible for liquidation in this simplified model. Real parameters depend on the asset and market.
Aave · Health factor & liquidations ↗The lifecycle of an Aave loan
Supply
Supply supported collateral to the selected market. Contract and asset risks begin here.
Sources and references
References for the mechanisms described. Numerical examples are hypothetical unless stated otherwise. Check the applicable version, network and jurisdiction.
References reviewed on 21 September 2026. All sources →