Is this market providing Aave with “incredible value”?

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The Aave protocol V1 was released in early 2020 with the goal of enhancing user experience and unlocking value in DeFi. Surprisingly, the protocol expanded to a market value of over $1 billion in six months, setting a new standard in the DeFi area.

Furthermore, V1 introduced innovations such as Flash Loans to the market, but it wasn’t until the release of V2 in December of last year that the Flash Loans were improved. In reality, V2 was created to lessen the risk of borrowing volatile assets. Furthermore, collateral swapping is increasingly commonly employed to avoid liquidations.

 

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Popular projects, including the likes of Aave, have migrated to Polygon ecosystem lately. The hype was building up in April itself, and clearly, it was all worth it.

Aave Polygon v. Aave V2:

Aave Polygon’s overall income climbed by 8.44 percent in the last four weeks, whereas Aave V2’s income decreased by 52.49 percent. Raphael, one of MATIC’s basic analysts, explained the major cause for the divergence. said,

“While the V2 market has somewhat tracked underlying asset prices, the Polygon market has not. Instead, the market overcame asset price decline with increased liquidity and demand.”

When adjusted revenue (nett liquidity mining) is examined, the difference is obvious. In this case, V2’s revenues have fallen by 70.58 percent, which is much higher than the price movement of the underlying assets. In comparison, Polygon has improved Aave’s adjusted sales by $72.80 percent.

Interestingly, Polygon’s market grew from 20.78 percent to 122.08 percent, and the trend appears to be continuing.

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Main drivers:

As known, the interest for depositors is directly correlated to the borrowing demand in the markets. Last month alone, V2’s interest dropped by more than 70%. The analyst highlighted,

“As borrow demand increases, yields compress, making the V2 market less attractive.”

Pumped-up yields, on the other hand, attract more locked value, which allows larger loans. Underlining another market tendency, the analyst added,

“Currently you can get over 3x on Dai in polygon market vs V2.”

Conversely, in the MATIC market, the borrow demand is not booming. Every single week, Polygon increases relative to V2. This trend can further be magnified by Polygon’s wider network adoption. Raphael asserted,

“Polygon posted double digit growth in daily active addresses for the last 4 weeks.”

Evidently, Aave on Polygon remained the most popular choice of Redditors when compared to Aave V2. All in all, the Polygon market is creating “incredible value” for Aave. The analyst concluded by asserting,

“The explosive adoption is startling.”

Based on the measures listed above, the winner is clear. Unsurprisingly, Aave’s native token had dropped 28.73 percent in the previous month and was rated 28th on CoinMarketCap, but Polygon’s MATIC had risen 42.41 percent in the same time frame and was rated 17th at press time.

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