This article introduces the top 10 lending protocols based on Defillama’s TVL rankings. Among them, Aave dominates in TVL. JustLend, Venus, and Kamino secure top spots due to their ecosystem monopolies. LayerBank and Avalon Finance rely on public chains with strong airdrop expectations to maintain their TVL.

Basic Information

The following sections detail the lending services, tokenomics, and comparative and core advantages of these top 10 lending protocols.

Aave ($AAVE)

Overview

Aave is an open-source decentralized lending protocol on Ethereum. It allows users to borrow or lend cryptocurrency without intermediaries. Users interact through smart contracts, which automate and ensure the security of the lending process. Aave offers innovative features, including traditional collateralized loans and uncollateralized flash loans.

Key Features

Aave’s main features include the following:

Deposits and Lending

AAVE Lending Page

• Deposits: Users can deposit their crypto assets into the Aave protocol as liquidity providers and earn interest in return.
• Borrowing: Users can collateralize their assets to borrow other cryptocurrencies. Aave supports various cryptocurrencies as collateral, including ETH, USDC, and DAI.
• Dynamic Interest Rates: Aave uses an algorithm to automatically adjust borrowing rates based on market supply and demand. Users can choose between fixed or variable rates, offering flexible borrowing options.

Flash Loans

Aave introduced “flash loans,” one of its most innovative features, allowing users to borrow and repay funds within the same transaction. These loans require no collateral but must be repaid within the same transaction, or it is automatically reverted. This makes flash loans useful for arbitrage, liquidation, and collateral restructuring.

Credit Delegation

Aave’s credit delegation allows users to borrow funds using another party’s credit. Liquidity providers can authorize borrowers to use their deposits without additional collateral. This mechanism is particularly promising for institutional lending and enterprise applications.

Cross-Chain Lending

Cross-Chain Lending Architecture

Aave is expanding to multiple blockchains, supporting Ethereum, Avalanche, and Polygon. This enables users to borrow and lend across chains, benefiting from faster and cheaper transactions.

Tokenomics

Aave’s native governance token, AAVE, serves several purposes, including governance, staking, and security:

• Governance: AAVE holders vote on protocol proposals, such as rate adjustments and platform upgrades, making Aave a decentralized, community-driven project.

Governance voting

• Umbrella Security Module: The latest security module, Umbrella, is a specialized security mechanism designed to protect the protocol against potential risks. It aims to address bad debts and other risk events that may impact the protocol. The Umbrella module further extends the AAVE protocol’s existing security module, providing additional protection for user assets.

In the new Umbrella module, users can stake their aTokens (interest-bearing tokens received after depositing in the AAVE protocol) as slashable assets to cover the protocol’s debt losses in extreme situations.

When users enable STK mode for their aTokens, these aTokens can be slashed to help the protocol cover bad debts. For example, if a market experiences bad debt, part or all of the staked aTokens will be slashed to compensate for the shortfall.

• Fee Discounts: Users can receive discounts when paying fees using AAVE tokens.

Supported Assets

Aave supports a wide range of cryptocurrencies for lending and borrowing, including but not limited to:

• Major Cryptocurrencies: ETH, BTC, USDC, DAI, USDT, etc.
• DeFi Tokens: UNI, YFI, LINK, SNX, etc.
• Stablecoins: USDC, DAI, TUSD, etc.

Aave also introduces aTokens, which serve as deposit receipts. For example, when depositing DAI, users receive aDAI. These tokens accumulate interest automatically and are pegged 1:1 to the deposited asset.

Aave V3

In 2022, Aave launched its V3 version, introducing several new features and improvements:

• Cross-Chain Liquidity: Users can migrate liquidity between multiple blockchains, enhancing asset mobility and platform flexibility.
• Higher Capital Efficiency: The V3 version introduces an efficient mode that allows users to borrow certain assets at higher collateral ratios, improving capital utilization.
• Isolation mode: Isolation mode allows new assets to be added to the protocol in a limited form, and only affects the market risk of related assets. This helps introduce new assets without causing systemic risk to the entire platform⁠

Isolation Mode

Security and Transparency

Aave’s security relies on smart contract audits, decentralized governance, and its security modules:

• Audits: Aave’s smart contracts undergo multiple audits by independent security firms, ensuring they resist vulnerabilities and malicious attacks.
• Umbrella Security Module: By staking aTokens as slashing assets, the protocol gains additional protection. This optimized risk management reduces liquidation pressure while providing stakers with additional rewards. The introduction of the Umbrella module marks a significant step toward enhancing Aave’s long-term security and sustainability.

Comparison with CeFi

Compared to centralized lending platforms like BlockFi and Celsius, Aave’s advantages include decentralization, transparency, and trustless operations:

• Decentralization: Aave’s lending process is managed through smart contracts, with no reliance on centralized entities. All rules are enforced by code.
• Transparency: All transactions and fund flows are auditable on the blockchain.
• Trustless: Users do not need to trust third-party institutions, interacting directly with smart contracts for lending and borrowing.

Conclusion

Aave leads the DeFi lending sector and continually expands its functionality and influence. The protocol and community focus partly on increasing the number of supported chains, often proposing expansion votes shortly after a new chain’s mainnet launch. Moreover, Aave’s innovative products—such as flash loans and cross-chain lending—offer broad development prospects, laying the groundwork for intent-based transactions and future chain abstraction. With the release of Aave V3, users now enjoy higher capital efficiency and more flexible asset management, attracting a growing number of users and institutions to the DeFi lending market.

JustLend ($JST)

Overview

JustLend is a decentralized lending platform on the TRON network. Users can deposit or borrow cryptocurrencies through smart contracts. The platform operates similarly to DeFi lending protocols on Ethereum, allowing users to borrow against collateral or earn interest by providing liquidity.

JustLend’s goal is to offer TRON users an efficient, transparent money market, helping them manage their crypto assets better while providing liquidity support to the TRON ecosystem.

Key Features

JustLend Lending Page

Deposits and Borrowing

• Deposits: Users can deposit TRX and other supported cryptocurrencies (USDT, WBTC, SUN, etc.) into the JustLend platform as liquidity providers to earn interest. These assets enter a liquidity pool, enabling lending to other users.
• Lending: Users can collateralize their assets (e.g., TRX) to borrow other cryptocurrencies. Borrowing rates dynamically adjust based on supply and demand. Borrowers must provide over-collateralization, ensuring the loan amount remains below the collateral’s value.
• Interest Rate Mechanism: JustLend uses a dynamic mechanism that automatically adjusts rates based on market conditions. As borrowing demand increases, interest rates rise, while deposit rates are determined by the liquidity pool’s balance and borrower demand.

Governance

JustLend is a decentralized protocol where the community governs through the JST token (JustLend’s native governance token). JST holders vote on key decisions, including interest rate adjustments, platform upgrades, and adding support for new assets.

Liquidity Mining

JustLend incentivizes user participation in its liquidity pool by offering liquidity mining rewards. Users earn JST tokens by depositing or borrowing assets, promoting liquidity growth on the platform. This incentive mechanism is similar to those on other DeFi platforms like Compound or Aave, aiming to attract more liquidity providers.

Supported Assets

JustLend supports multiple assets within the TRON ecosystem, enabling users to deposit and borrow. These assets include:

• TRX: TRON’s native token, serving as a primary collateral asset.
• USDT: A stablecoin and one of the platform’s most popular assets for borrowing.
• WBTC: Wrapped Bitcoin, allowing Bitcoin to be used on the TRON network.
• SUN: Other TRON ecosystem tokens like SUN and JST can also be used for lending and borrowing on JustLend.

Collateral Liquidation Mechanism

JustLend requires users to over-collateralize when borrowing. If the value of the collateral drops below a specified threshold relative to the borrowed amount, the platform triggers an automatic liquidation. This ensures the stability of the lending market and prevents users from defaulting on loans, protecting the liquidity pool.

Tokenomics

JST Token

Token Distribution Model

JST is the native governance token of the JustLend platform, serving the following functions:

• Governance: JST holders can vote on various proposals for the JustLend platform, including adjustments to interest rate parameters, support for new assets, and technical upgrades. This makes the platform’s management more decentralized and community-driven.
• Liquidity Mining Rewards: JST rewards liquidity providers. Users can earn JST as a return on deposits or borrowing, incentivizing more users to participate in the platform’s lending market.

Security and Transparency

JustLend automates the lending process through smart contracts. All transaction records are publicly available on the TRON blockchain for transparency. Additionally, the platform’s smart contracts undergo security audits to ensure the safety of user funds.

Comparison with Other Lending Protocols

JustLend is a key DeFi protocol within the TRON ecosystem, tightly integrated with other TRON decentralized applications and services. TRON’s high-performance infrastructure, with low transaction fees and fast speeds, allows JustLend to offer efficient, low-cost lending services.

Energy Rental

TRON’s energy rental system requires energy to pay gas fees, and JustLend offers energy leasing in addition to regular lending to further reduce user interaction costs.

These factors give JustLend a competitive edge against other blockchain lending protocols like Aave or Compound on Ethereum.

TRON’s high throughput, quick confirmation times, and low fees offer JustLend a strong, scalable technical foundation, attracting more users to participate.

Conclusion

JustLend is a core lending protocol in the TRON ecosystem, offering decentralized deposit and lending services. Its integration with TRON’s efficient blockchain provides a low-fee, high-performance lending experience. JustLend’s strong alignment with the TRON ecosystem ensures its dominance even as leading lending protocols enter the TRON network. The rise of memes on TRON has further increased JustLend’s usage.

Spark Protocol

Overview

Spark Protocol is a decentralized lending market launched by MakerDAO. It integrates direct lending features within the MakerDAO ecosystem. Through Spark, users can obtain DAI loans using assets like ETH, stETH, and sDAI as collateral.

Key Features

Spark Lending Page

Deposits and Borrowing

• Deposits: Users can deposit their crypto assets (such as Spark’s native token FLR or other supported tokens) into Spark Protocol as liquidity providers. Unlike traditional lending platforms, depositors earn interest from the platform’s borrowing fees.
• Lending: Users can collateralize their crypto assets and borrow other supported tokens. Spark supports various assets, and borrowers provide over-collateralization to secure their loans. The lending rates dynamically adjust to balance market conditions.
• Interest Rate Mechanism: Spark uses algorithms to adjust interest rates based on borrowing demand and liquidity conditions, ensuring users get the most optimal rates for different market environments.

Saving and Farming

Spark Protocol offers Saving and Farming features. Saving allows users to deposit stablecoins into Sky’s savings pool through the Spark website, earning returns. On the other hand, farming involves depositing stablecoins to earn Sky tokens.

Flash Loans

Spark plans to introduce a flash loan feature similar to Aave, where users can borrow assets without collateral for short-term arbitrage, liquidation, or fund restructuring operations, all completed within a single transaction. This type of unsecured loan is an advanced feature in DeFi, providing greater flexibility for advanced users and developers.

Governance

Spark will feature a community governance model controlled by SPK tokens. Over time, governance will autonomously operate Spark’s functions within the Sky Star ecosystem framework.

Tokenomics

SPK Token

Token Distribution Model

SPK is the governance token for Spark Sky Star. SPK tokens have not yet been launched. Beware of scammers and fake SPK tokens. Official announcements on the token release will be made on the official X accounts of Sky (@SkyEcosystem) and Spark (@sparkdotfi).

The official release date is yet to be determined. Spark is conducting a pre-farming airdrop event based on platform usage, with users earning airdrops according to their activity during specific periods or “seasons.”

Security and Transparency

Spark Protocol undergoes third-party audits to ensure the security of its smart contracts and implements strict risk control mechanisms, such as collateral liquidation and system safeguards, to mitigate risks during extreme market conditions.

Liquidation Mechanism

Similar to other lending protocols, Spark Protocol uses an automated liquidation mechanism. When the value of a borrower’s collateral assets falls below a set threshold, the system triggers automatic liquidation to ensure that the interests of liquidity providers are not compromised.

Comparison with Other Lending Protocols

SPARK Protocol is a decentralized lending market designed to offer more transparent and fair financial services. Compared to other decentralized lending platforms, SPARK Protocol has several unique advantages:

Deep Integration with DAI

SPARK Protocol is part of the MakerDAO ecosystem and integrates with the DAI stablecoin. Users can seamlessly use DAI as collateral or for borrowing, providing greater convenience for those who use DAI. This integration ensures a more stable source of liquidity compared to other protocols.

Highly Flexible Collateral Choices

SPARK Protocol supports various collateral types, allowing users to choose according to their needs. It is not limited to DAI and supports multiple asset types, enhancing flexibility in asset management.

Competitive Interest Rates

Due to SPARK Protocol’s connection with MakerDAO, it can leverage Maker’s global collateral vault system, potentially offering lower borrowing rates. Users with outstanding debt on Maker Vaults can refinance with more favorable terms through SPARK Protocol.

Innovative Risk Management

SPARK Protocol uses advanced risk management, combining MakerDAO’s risk assessment methods. It doesn’t solely rely on market volatility to evaluate risk but employs a set of complex parameters and mechanisms to minimize risks for borrowers and lenders.

Transparent Governance

SPARK Protocol adopts MakerDAO’s governance model, utilizing a decentralized autonomous organization (DAO) to enable community-driven decision-making. This approach ensures transparency and fairness in determining protocol updates, interest rates, and risk parameters through community voting.

Unique Lending Market Design

SPARK’s design allows users to borrow mainstream cryptocurrencies and access a broader range of assets, emphasizing capital efficiency and liquidity management optimization.

Conclusion

In summary, SPARK Protocol’s main advantages include deep integration with MakerDAO and DAI, flexible collateral management, competitive interest rates, innovative risk management, and transparent governance. For users seeking low-risk, high-transparency lending closely tied to the DAI stablecoin, SPARK Protocol is highly attractive.

Compound Finance ($COMP)

Overview

Compound is a decentralized platform that allows users to deposit and borrow crypto assets. By depositing assets into Compound, users become liquidity providers and can earn interest. Users can also collateralize their assets to borrow other cryptocurrencies. Compound automates the lending process through algorithms and smart contracts, ensuring security and transparency.

Key Features

Deposits and Lending

• Single Borrowing Asset Model

One of the biggest changes in Compound V3 is the introduction of a single-borrowing asset model. This means that each market allows users to borrow only one specific asset, while other assets can only be used as collateral. For example, in the USDC market, users can collateralize ETH, WBTC, or DAI but can only borrow USDC. Compared to V2, which allows users to borrow multiple assets simultaneously, the V3 design simplifies the system, reducing complexity and systemic risk.

Compound Lending Page

• Higher Capital Efficiency

By limiting the types of assets that can be borrowed, Compound V3 increases capital efficiency. Since users borrow only one asset, the protocol’s capital needs are reduced, helping to optimize the balance sheet and improve the protocol’s safety. This also simplifies the liquidation process by removing cross-asset complexities, lowering liquidation risks.

• Optimized Risk Management

Compound V3 strengthens risk management with several features aimed at reducing risk for both the protocol and users:

Isolated Asset Pools: Each market’s borrowing risk is isolated from other markets. This means that the volatility of one asset market will not affect the health of others.

Dynamic Risk Parameter Adjustments: V3 introduces more flexible risk management strategies, allowing the protocol to adjust liquidation thresholds, collateral ratios, and other risk parameters more quickly to respond to market changes.

Governance

Governance Proposal

Compound is fully decentralized, with governance led by the community. The governance token COMP allows users to vote on key protocol decisions. COMP holders can propose and vote on platform improvement proposals, including:

• Adding or removing supported assets.
• Adjusting interest rate models.
• Enhancing protocol features.

COMP’s decentralized governance ensures the community controls the protocol’s development, guaranteeing fairness and transparency.

Tokenomics

Token Allocations and Vesting Schedule

Compound’s latest tokenomics, particularly its governance token COMP, focus on decentralization, protocol incentives, and long-term sustainability. As the Compound protocol evolves, especially with V3, its tokenomics have significantly changed. Below are the key aspects of Compound’s latest tokenomics:

(1) COMP Token

• Governance Rights: COMP tokens’ primary function is governance. COMP holders can propose and vote on critical changes to the protocol, such as interest rate models, liquidity mining rewards, and asset listings. Compound’s decentralized governance is entirely community-driven, with any user holding enough COMP able to submit governance proposals.
• Liquidity Incentives: Compound distributes COMP tokens to incentivize users to provide liquidity and participate in borrowing. Depositors and borrowers can earn COMP by participating in Compound’s markets, attracting users and maintaining liquidity.

(2) Compound V3 Tokenomics Adjustments

Compound V3 made several important adjustments to tokenomics aimed at enhancing protocol sustainability and improving economic incentives:

• Dynamic Rewards Adjustments: In V3, COMP token rewards become more flexible. The protocol can dynamically adjust COMP distribution rates based on market demand and liquidity supply. Unlike V2, V3 places tighter control on COMP token distribution, reducing excessive incentives and ensuring long-term sustainability.
• Diverse Reward Structure: To reduce reliance on COMP token issuance, Compound V3 can introduce other tokens as rewards (e.g., USDC, GHO, or other assets). This provides liquidity providers and borrowers with a more diversified set of rewards while helping alleviate inflationary pressure on COMP tokens.
• Reduced COMP Supply: V3 decreases COMP issuance rates to limit its long-term token supply. This change addresses the over-issuance issue observed in V2, preventing excessive COMP token flooding into the market and reducing potential price pressures.

(3) Token Distribution

COMP token distribution is a key part of the protocol’s design, intended to foster decentralized development and user engagement:

• Liquidity Providers and Borrowers: The largest portion of COMP tokens is distributed to liquidity providers and borrowers as a reward for their participation in the protocol. These tokens are distributed through the protocol’s COMP distribution plan, which dynamically adjusts based on market activity.
• Community and Governance Fund: A portion of COMP tokens is reserved for community development, ecosystem expansion, and governance proposals, incentivizing long-term users and contributors.
• Team and Investors: A portion of COMP tokens is allocated to the Compound team and early investors as rewards for supporting and contributing to the protocol’s development. These tokens typically have a lock-up period to ensure the team’s long-term incentives align with the protocol’s growth.

Liquidation Mechanism

Compound uses an over-collateralization mechanism to ensure the safety of borrowing. Borrowers must provide collateral exceeding the value of their loan. If the value of the collateral drops below a certain liquidation threshold due to market volatility, the system automatically triggers liquidation, selling the collateral to repay the loan. This prevents bad debt and ensures the overall stability of the lending market.

Liquidator Rewards

When a borrower’s loan approaches the liquidation threshold, other users can act as liquidators by repaying the loan and receiving a portion of the collateral as a reward. The liquidation mechanism ensures the system’s health while incentivizing users to participate in maintaining platform security.

Supported Assets

With the V3 update, Compound now supports only USDC as the base currency. The simplified V3 design reduces complexity and systemic risks.

Security and Transparency

All transactions and operations on Compound are automated by smart contracts. Transaction records are publicly available, allowing users to review and verify them anytime. This ensures transparency in fund management. Compound’s smart contracts also undergo multiple security audits to safeguard user funds and ensure the platform’s stability.

Comparison with Other Lending Protocols

Advantages

· Efficient Lending Market: Compound’s decentralized lending market is highly liquid and offers efficient interest rate mechanisms, allowing users to easily deposit, borrow, and earn interest.

· COMP Governance Token: Decentralized governance empowers the community to collectively decide the protocol’s development direction, enhancing platform decentralization and transparency.

Disadvantages

· Liquidation Risk: During periods of high market volatility, users’ collateral assets may be quickly liquidated, resulting in losses for borrowers.

· Interest Rate Volatility: Since interest rates are dynamically adjusted based on market supply and demand, borrowing rates and deposit returns may fluctuate significantly, requiring users to manage interest rate uncertainty.

Conclusion

Compound Finance is a pioneering decentralized lending platform that offers secure and flexible crypto asset lending services without intermediaries. Its cTokens model and decentralized governance mechanism make it a cornerstone of the DeFi ecosystem and the foundation of many DeFi applications. Compound will remain a key player in the DeFi lending market as it continues to innovate and develop.

Venus Protocol ($XVS)

Overview

Venus Protocol is a DeFi platform on the BNB Smart Chain that combines lending, decentralized stablecoin issuance, and crypto asset collateralization. Leveraging the chain’s efficiency and low costs, Venus offers a seamless financial solution. Users can manage their crypto assets effectively through multi-asset collateral support and lending services, while also stabilizing their funds by minting the VAI stablecoin.

Key Features

Decentralized Lending

Venus provides a decentralized lending market, allowing users to deposit various crypto assets to earn interest or borrow other cryptocurrencies by over-collateralizing their assets.

Venus Lending Page

• Deposits: Users can deposit crypto assets into Venus’s liquidity pool as liquidity providers. These deposits support the platform’s lending activities, and depositors earn interest from borrowers’ payments.
• Borrowing: Users can collateralize their crypto assets and borrow other supported cryptocurrencies. To prevent defaults, Venus uses an over-collateralization model, requiring borrowers to provide more collateral than the value of their loan.
• Interest Rate Mechanism: Venus adjusts interest rates based on market supply and demand. When borrowing demand is high, borrowing rates increase, deposit yields rise, and vice versa. This dynamic model ensures market balance.

VAI Stablecoin Issuance

VAI is a decentralized stablecoin issued on the Venus platform, pegged to 1 USD. VAI is generated through collateralized lending, similar to MakerDAO’s DAI stablecoin.

· How VAI is Generated: Users can generate VAI by collateralizing supported crypto assets like BNB, BTC, and ETH. VAI gives users a stable asset pegged to the dollar, increasing asset management flexibility.

· Decentralization: VAI is fully backed by over-collateralized assets, and its issuance and circulation are managed by smart contracts, ensuring transparency and stability.

XVS Token

XVS is the native governance token of Venus Protocol. Holders can participate in decentralized governance through XVS.

Governence Proposal

• Governance Participation: XVS holders can vote on key proposals related to the platform, including adjustments to borrowing rates, the introduction of new assets, and optimizations to protocol parameters.
• Distribution Mechanism: Users earn XVS tokens as rewards for participating in lending activities or liquidity mining, incentivizing users to provide liquidity and engage in protocol governance.

Tokenomics

Token Allocation Model

XVS Token

XVS is Venus’s governance token, enabling decentralized governance similar to Compound’s COMP token. Holders can vote on critical parameters and the protocol’s future development. XVS was not pre-mined, and the token is fully community-owned and controlled.

• Token Functionality: Beyond governance voting, XVS is used to incentivize participation in the platform’s lending activities. Borrowers and liquidity providers can earn XVS tokens through their activity.

VAI Stablecoin

VAI is a stablecoin generated through crypto asset collateralization, pegged to 1 USD. It allows users to lock their crypto assets while using a stable asset for other DeFi activities. Backed by over-collateralized assets, VAI maintains decentralization and censorship resistance, similar to MakerDAO’s DAI.

Liquidation Mechanism

Venus uses over-collateralization to ensure the platform’s financial safety. Borrowers must provide collateral exceeding the value of their loan. When market volatility occurs and the collateral value drops below the minimum required, the system automatically triggers liquidation.

• Liquidator Rewards: Liquidators can repay loans and receive a portion of the collateral as a reward. This mechanism ensures effective risk management and incentivizes users to maintain the platform’s health.

Supported Assets

Venus supports many cryptocurrencies as collateral and lending assets, including major crypto assets and stablecoins. Supported assets include:

• BNB (BNB Smart Chain Coin)
• BTCB (Bitcoin on BNB Smart Chain)
• ETH (Ethereum)
• XRP (Ripple)
• USDC (USD Coin)
• USDT (Tether)

The diverse asset support attracts a large user base, offering flexibility in managing crypto assets.

Governance Mechanism

XVS token holders control Venus’s decentralized governance. Holders can vote on various proposals related to the platform, including borrowing rate adjustments, introducing new assets, or changes to protocol rules.

• Governance Process: XVS holders can propose and vote on improvements to the protocol. This decentralized governance model ensures Venus remains community-controlled rather than controlled by centralized entities.

Security and Transparency

Venus uses BNB Smart Chain smart contracts to ensure fully decentralized lending and stablecoin issuance. All transactions are publicly accessible and transparent. Users can view their deposits, loans, and liquidation records anytime. Venus’s smart contracts also undergo audits to ensure user funds’ security.

However, on May 18, 2021, Venus experienced a large-scale bad debt event due to price manipulation of its XVS token. The price of XVS surged for a short period, allowing users to collateralize with a small amount of XVS and borrow large amounts. Shortly after, the XVS token crashed, and borrowers abandoned their loans, effectively cashing out XVS and causing significant losses to lenders and the protocol. This event resulted in approximately $95 million in bad debt.

Comparison with Other DeFi Protocols

Advantages

• Low-Cost, High-Efficiency BNB Smart Chain: Venus benefits from BNB Smart Chain’s lower transaction fees and faster speeds compared to Ethereum, allowing users to perform lending operations at a lower cost.
• Integrated Functionality: Venus combines lending and stablecoin issuance in a single platform. Users can borrow and issue stablecoins, making Venus a more comprehensive solution.
• Decentralized Governance via XVS: Through decentralized governance, the Venus platform is controlled by the community, enhancing its decentralized nature.

Disadvantages

• Liquidation Risk: During periods of high market volatility, users’ collateral assets may be liquidated, particularly for highly leveraged borrowers, which can lead to significant financial losses.
• Competitive Pressure: The DeFi space is crowded with numerous lending protocols like Aave and Compound, and Venus faces fierce competition, particularly regarding supported assets and favorable interest rates, which will require continuous improvement to attract users.

Conclusion

Venus is a leading decentralized lending and stablecoin issuance protocol on BNB Smart Chain, combining efficient lending features with decentralized governance. Its low costs and high performance on BNB Smart Chain give Venus a unique advantage in the DeFi ecosystem. At the same time, XVS’s decentralized governance enhances the platform’s sustainability and innovation. As DeFi continues to evolve, Venus has the potential to become a key player in cross-chain and multifunctional financial platforms.

Morpho

Overview

Morpho’s latest protocol, Morpho Blue, allows the creation of isolated lending markets by specifying any loan asset, collateral asset, liquidation LTV (LLTV), oracle, and interest rate model. Morpho Blue offers higher collateral factors, increased interest rates, and a 70% reduction in gas costs. Anyone can create a market, which can be composed of any assets.

Key Features

Morpho Lending Page

P2P Lending Model

Morpho’s innovation lies in its peer-to-peer (P2P) matching layer. Traditional DeFi lending protocols use supply-demand curves to adjust interest rates dynamically. Morpho directly matches borrowers and lenders, eliminating some intermediary costs.

P2P Model

• Direct Matching: On Morpho, borrowers and lenders can be directly paired, allowing them to enjoy better rates. Lenders receive higher interest rates than the market, while borrowers get lower borrowing rates.
• Market Rate Supplementation: If either party’s demand is not immediately met, funds are automatically routed to platforms like Compound or Aave, ensuring that funds are never idle. This enhances capital efficiency while leveraging the liquidity advantages of traditional lending platforms.

Increased Capital Efficiency

In traditional lending protocols, supply-demand curves often prevent optimal rates for borrowers and lenders. By using P2P matching, Morpho reduces idle capital, improving the overall capital utilization of the lending market.

Compatibility with Existing Platforms

Aggregated Liquidity

Morpho is compatible with established DeFi lending platforms like Compound and Aave. When user funds are not directly matched, they can still earn interest through these platforms. This design ensures that Morpho integrates seamlessly into the existing DeFi ecosystem without altering user behavior.

Interest Rate Optimization

Morpho’s P2P matching mechanism ensures more transparent interest rates between borrowers and lenders, reducing the spread typically found in traditional DeFi protocols. Both parties get mid-market rates instead of being positioned at less favorable points on the supply-demand curve.

How It Works

Step 1: User Deposits or Borrows

· Users deposit assets into Morpho, becoming lenders and earning interest.

· Borrowers can collateralize a certain value of crypto assets and borrow desired tokens.

Step 2: P2P Matching

· Morpho first attempts to directly match lenders and borrowers, offering them better rates than traditional markets.

Step 3: Liquidity Optimization

· If a match isn’t found, Morpho automatically redirects unmatched funds to platforms like Compound or Aave, ensuring no idle funds.

Tokenomics

Morpho has not yet launched a native token. The platform’s revenue comes from optimizing interest rates, rather than relying on token rewards. This focus allows Morpho to prioritize sustainable lending solutions instead of attracting liquidity through short-term incentives.

Governance Mechanism

Currently, Morpho does not have a decentralized governance token. A core development team manages the platform’s development and operation. In the future, decentralized governance may be introduced, similar to other DeFi protocols like Aave or Compound, where token holders can vote on protocol upgrades and parameter adjustments.

Advantages and Disadvantages

Advantages

• Improved Interest Rate Competitiveness: P2P matching allows Morpho to offer lower borrowing rates for borrowers and higher returns for lenders.
• Compatibility with Existing DeFi Platforms: Morpho integrates with major platforms like Compound and Aave, enabling unmatched funds to continue earning interest in traditional lending markets.
• High Capital Efficiency: Morpho increases capital efficiency across the system by reducing the interest rate spread between borrowers and lenders.

Disadvantages

• Liquidity Issues: While Morpho’s design boosts rates when matching is successful, in cases of low liquidity, users may still rely on traditional markets, possibly missing out on optimal rates.
• Market Acceptance: Morpho needs to attract enough users and liquidity to remain competitive in the current market as a new lending model.

Comparison with Other DeFi Lending Protocols

Comparison with Compound and Aave:

• Interest Rate Differences: Platforms like Compound and Aave set rates based on supply and demand, while Morpho reduces the spread by directly matching lenders and borrowers, providing more competitive rates.
• Capital Efficiency: Morpho enhances capital efficiency by narrowing the spread between borrowers and lenders, allowing users to make better use of their capital.
• Compatibility: Morpho integrates with Compound and Aave, giving users more options and ensuring unmatched funds continue earning interest.

Conclusion

Morpho is a unique DeFi lending protocol focused on improving capital efficiency and interest rates through its P2P lending model. It is compatible with traditional lending platforms like Compound and Aave, offering users better fund management and an improved user experience. As the DeFi ecosystem grows, Morpho is positioned to become a significant player in the decentralized lending market.

Kamino ($KMNO)

Overview

Kamino Lend (K-Lend) is a decentralized lending platform built on the Solana blockchain, designed to create an efficient and secure DeFi ecosystem for borrowers and liquidity providers. Key features of K-Lend include liquidity market integration, automated deleveraging mechanisms, and tools for efficient capital management.

Key Features

Kamino Borrow/Lend Page

• Unified Liquidity Market: Kamino uses a single liquidity market, replacing the traditional multi-pool design. This enhances liquidity utilization and increases efficiency for both borrowers and liquidity providers.
• Elevation Mode: This mode allows users to borrow with a higher Loan-to-Value (LTV) ratio when dealing with related or soft-pegged assets, increasing capital efficiency.
• Automated Deleveraging: When market fluctuations occur, Kamino automatically reduces a user’s borrowed amount to maintain a safer loan-to-value ratio, lowering risk during market downturns.
• Long/Short Strategies: Users can easily employ leverage to bet on market movements, whether up or down, through simple operations.

Risk Management

Kamino ensures platform stability and the safety of user assets through its advanced risk engine, asset-tiering system, and real-time risk dashboard. Its automated deleveraging and oracle manipulation prevention mechanisms help reduce potential risks.

User Benefits

As liquidity providers, users can earn interest by lending assets, and Kamino’s design also supports higher potential returns. Moreover, Borrowers can use leverage to boost returns on their assets.

Overall, Kamino Lend offers an integrated DeFi experience that is suitable for users seeking efficient capital use and risk management.

Tokenomics

Token Distribution Model

The following are the key features of KMNO’s tokenomics:

• Staking: Kamino holders can stake their KMNO on Kamino - this allows users to receive staking boosts, thereby increasing their current points income.
• Governance: If Kamino implements protocol governance, KMNO tokens could serve as the primary voting tokens for decisions regarding user rewards, protocol grants, revenue distribution, and risk management.

Comparison with Other Lending Protocols

Kamino Lend has several competitive advantages over other popular Solana-based lending protocols like Solend and MarginFi:

• Liquidity Efficiency: Unlike Solend’s multi-pool design, Kamino uses a unified liquidity market, significantly improving liquidity utilization and reducing market friction and fragmentation.
• Leverage and Automation: Kamino’s elevation mode and automated deleveraging enable users to enjoy higher LTV ratios on volatile assets while automatically adjusting for market risks. In contrast, platforms like MarginFi rely on manual management and more fragmented liquidity pools.
• Risk Management: Kamino’s asset-tiering and automatic liquidation mechanisms effectively mitigate risks from asset price fluctuations and oracle manipulation, while Solend and MarginFi rely more on traditional liquidation and borrowing limits.

Conclusion

Kamino Lend demonstrates strong competitiveness and growth potential through its technological innovations, comprehensive risk management system, and potential token incentive mechanisms. As the platform’s features expand and its token is launched, Kamino has become the largest lending protocol on Solana. It has attracted a significant user base and stands out in the DeFi lending space. Kamino’s Total Value Locked (TVL) is now far ahead of other protocols on Solana, and its partnership with Jupiter’s JLP leverage tool allows holders to maximize their returns by up to 3x, driving high demand.

LayerBank ($LAB)

Overview

LayerBank Lending Page

LayerBank is a decentralized finance (DeFi) lending protocol that offers cross-chain stable cryptocurrency lending services. It allows users to collateralize assets such as BTC, ETH, and USDC for permissionless borrowing. LayerBank focuses on becoming a liquidity hub for major EVM-compatible chains, supporting several scaling networks like zkLink Nova, Mode, Scroll, and Linea.

Tokenomics

LayerBank’s native token is called LineaBank (LAB), but the project is undergoing a token migration and is expected to launch a new token, ULAB. Specific details about the tokenomics have not yet been disclosed. Currently, LAB tokens are used within the LayerBank ecosystem to incentivize users to participate in lending and liquidity provision.

Comparison with Other Popular Lending Protocols

LayerBank can be compared to other popular lending protocols like Aave and Compound. While LayerBank is based on Compound V2, it emphasizes supporting multiple EVM-compatible Layer 2 and Layer 3 networks, whereas Aave and Compound focus primarily on Ethereum and its Layer 2 solutions.

Conclusion

Since its launch, LayerBank’s total value locked (TVL) has significantly increased, recently surpassing $800 million—a nearly 500% rise from its low point of $140 million in April 2024. This growth is mainly due to the adoption of zkLink Nova and consistent user participation. In May 2024 alone, the protocol attracted $350 million in inflows in just one week. Moving forward, LayerBank is likely to continue expanding its multi-chain support and enhancing its lending services. In short, its strategy focuses on launching on as many chains as possible, especially those with airdrop potential, to drive extensive user interactions rather than deepening the protocol’s functionality.

Avalon Finance

Overview

Avalon Finance is a cross-chain lending platform that brings Bitcoin into the DeFi ecosystem. The platform leverages the Core DAO’s Satoshi Plus consensus mechanism to enhance the security and liquidity of Bitcoin assets. Additionally, Avalon has introduced a stablecoin, USDA, pegged 1:1 with USDT, which utilizes LayerZero to enable cross-chain lending, allowing users to collateralize and borrow assets across multiple blockchains.

Key Features

Avalon’s core features include:

Avalon Finance Lending Page

• Over-collateralized Lending: Users can collateralize Bitcoin and other major crypto assets to borrow funds. The platform uses an isolated pool mechanism, supporting various major and low-liquidity tokens, ensuring the security of users’ collateralized assets.
• Algorithmic Stablecoin: Avalon has introduced USDA, an algorithmic stablecoin based on the lending protocol. USDA aims to increase capital efficiency and enhance the platform’s competitiveness in the lending market. Through a centralized exchange mechanism, USDA maintains a 1:1 peg with USDT.
• Real-World Asset (RWA) Lending: Avalon enables users to borrow using real-world assets through permissioned and permissionless protocols, expanding the application of DeFi beyond just crypto assets.

Tokenomics

Avalon has not yet fully disclosed its tokenomics details. However, the platform’s ecosystem is likely to revolve around its native token, which will be used to incentivize borrowing, liquidity provision, and participation in platform governance. As Avalon expands to more blockchains, the token will play a larger role in enabling seamless cross-chain operations.

Comparison with Other Lending Protocols

Avalon Finance’s main competitors in the Bitcoin DeFi space include well-known lending platforms like Aave and Compound. However, Avalon offers several distinct advantages:

• Bitcoin Integration: While most mainstream lending platforms focus on Ethereum-based assets, Avalon specializes in Bitcoin’s DeFi applications, using cross-chain technology to broaden Bitcoin’s role in DeFi.
• Cross-Chain Capability: Avalon supports multi-chain assets and liquidity aggregation, while traditional lending protocols typically focus on assets within a single blockchain. This cross-chain support enhances Avalon’s flexibility in liquidity utilization and user experience.
• RWA Lending: Avalon’s RWA lending feature expands beyond traditional crypto asset lending, venturing into real-world asset lending—a frontier many other DeFi platforms have yet to fully explore.

Conclusion

Avalon Finance is quickly becoming a key player in the DeFi ecosystem through its innovative lending protocols, cross-chain capabilities, and Bitcoin integration. The platform’s over-collateralized lending, algorithmic stablecoin, and RWA lending options provide users with diverse tools that significantly improve liquidity and capital efficiency. Avalon is poised for breakthroughs in Bitcoin DeFi and cross-chain lending. Like LayerBank, Avalon aims to expand onto newly launched mainnets, attracting airdrop hunters to boost platform engagement.

Fluid

Overview

Fluid is built on a liquidity layer, which is the foundation for other protocols. This layer acts as a central hub, aggregating liquidity across protocols. Fluid DEX, the primary decentralized exchange built on this liquidity layer, allows users to borrow against collateral and use it as Automated Market Maker (AMM) liquidity, generating fee income. For mainstream tokens, Fluid offers a lower Loan-to-Value (LTV) ratio than the market average, attracting borrowers.

Key Features

Fluid Lending Page

1. AI-Driven Liquidity Aggregation: Fluid’s proprietary AI system aggregates liquidity across multiple platforms, providing optimal pricing and execution for decentralized finance (DeFi) and centralized finance (CeFi) markets.
2. Partnership with Polygon: Fluid has chosen Polygon as its primary blockchain platform, leveraging its scalability, low latency, and low transaction costs to optimize Fluid’s DeFi operations.
3. Advanced Financial Tools: Fluid develops sophisticated trading tools for large institutions, supporting high-frequency trading strategies in spot, futures, and options markets.

Tokenomics

Fluid has not yet conducted a token generation event (TGE). The published development roadmap does not include any immediate plans for a token launch.

Comparison with Other Protocols

Compared to decentralized liquidity-focused protocols like Uniswap or 1inch, Fluid combines the benefits of both CeFi and DeFi, making it particularly suitable for institutional traders. Its AI system offers superior execution quality and pricing, differentiating it from traditional DeFi aggregators.

Compared to decentralized liquidity-focused protocols like Uniswap or 1inch, Fluid combines the benefits of both CeFi and DeFi, making it particularly suitable for institutional traders. Its AI system offers superior execution quality and pricing, setting it apart from traditional DeFi aggregators.

Conclusion

Fluid is positioning itself as a key player in the multi-trillion-dollar market for tokenized assets, including derivatives, securitized tokens, and NFTs. With a highly experienced team in the financial sector and partnerships with top blockchains like Polygon, Fluid is set to become a major player in the future of liquidity aggregation.

Reference：
[1] DeFiLlama
https://defillama.com/protocols/Lending

Protocol Documentation
Aave: https://docs.aave.com/hub
Justlend: https://docs.justlend.org/guides/supply-and-borrow
Spark: https://docs.spark.fi/
Compound：https://docs.compound.finance/
Venus：https://docs-v4.venus.io/
Morpho：https://docs.morpho.org/
Kamino：https://docs.kamino.finance/
Layerbank：https://docs.layerbank.finance/
Avalonfinance：https://docs.avalonfinance.xyz/
Fluid：https://fluid.guides.instadapp.io/