A concrete example
Rising token prices can increase TVL even without new deposits. Double counting may affect comparisons.
In context
Suppliers receive aTokens representing their supplied position and accrued interest under the protocol’s accounting. Borrowing creates a debt position that also changes with interest. AAVE, an aToken and the underlying asset are different objects with different roles.
The related mechanism, visually
- 01Supply 1,000
- 02Borrow 700
- 03Available 300
- 04Repayment restores liquidity
Read these as connected concepts, not necessarily consecutive steps.
Read the explanation
A lending pool combines supplied assets and makes part of them available to borrowers under protocol rules. The supplier receives a claim represented by the protocol’s accounting or receipt token. The underlying assets can be borrowed, so the displayed supply balance is not identical to cash immediately available for every supplier to withdraw at once.
Put the mechanism into context
In a fictional reserve, users supply 1,000 units and borrowers draw 700. Ignore interest and reserve adjustments. Map the 300 units of available liquidity separately from supplier claims and borrower debt. Then consider a withdrawal request of 400.
Apply it in the workshop →What this mechanism does not guarantee
Supplying and enabling collateral are distinct choices. Borrowing creates debt that can accrue interest even while the user is inactive. Each market and network has its own assets, limits and risk settings. A token named similarly on another chain is not automatically the same reserve or an equivalent claim.
Explore the full explanation
Aave lending pools and aTokens
Aave is a liquidity protocol deployed on multiple networks.