When it comes to decentralized finance (DeFi), lending protocols are some of the most popular applications. In the past year or two, a number of leading protocols have emerged, each with its own strengths and weaknesses. In this article, we'll take a comprehensive look at two of the most popular DeFi lending protocols: AAVE and Compound.
We'll compare them based on four key criteria: interest rates, available networks, available tokens, and security. Let's get started!
Table of Contents
Criteria #1: AAVE vs Compound Interest Rates
When it comes to earning interest on your crypto holdings, both AAVE and Compound offer very competitive rates. On AAVE, you can currently earn up to 6% annual percentage yield (APY) on your stablecoin deposits, while on Compound you can earn up to 4% APY.
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Criteria #2: Available Networks
AAVE is the largest multi-chain DeFi lending platform with markets across 7 different networks including Ethereum, Avalanche, Arbitrum, Optimism, Harmony, Polygon, and Fantom. The AAVE money market is also expected to be released on Solana soon with the impending release of Neon Labs' Solana EVM network.
Compound on the other hand is only available on the Ethereum (ETH) mainnet. This is a significant disadvantage when compared to AAVE that is available on various networks and is overall much more user friendly and cheaper to use.
Criteria #3: Available Coins
AAVE currently supports over 30 different types of crypto assets across 5 different networks, while Compound supports around 18 on Ethereum only. So if you're looking to deposit a wide range of coins and tokens, AAVE is the better option.
Criteria #4: Security
Both AAVE and Compound are built on Ethereum and leverage smart contracts for security. However, AAVE has been audited by a number of leading security firms, including Quantstamp and ConsenSys Diligence, while Compound has not. So if security is your top priority, AAVE is the better choice.
Final Verdict: Is AAVE or Compound better?
Overall, AAVE is the superior DeFi lending platform because it offers higher crypto interest rates and more markets across a wider variety of Layer 1 and Layer 2 networks.
The AAVE platform has over double the total value of deposits compared to Compound, which highlights that it is the superior DeFi lending application for retail and institutional investors.