Aave and Compound DeFi Risk Research

By Asan Tulemis, 22 October 2021

Executive Summary

This report is a comparative analysis of the Compound and Aave protocols. We assessed profitability and risk metrics of both. The report assesses characteristics from three different perspectives

  1. token holders,

  2. depositors, and

  3. borrowers

Section 1 - covers investment metrics, specifically net interest margin (NIM) and annualized rate of return, in other words, yield associated with investment into the protocol.

Section 2 - covers risk metrics including market risk, liquidity risk, and operational risk. Credit risk is out of scope. Based on the conducted analysis, Aave showed better results compared to Compound, subject to a disclaimer.

Context

This report was commissioned by Coinshift.

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