Aave V3 Reports Zero Non-Performing Loans, Shifts Risk to Borrowers
- Aave V3 recorded zero non-performing loans in its Ethereum lending market for the period studied.
- The study analyzed transaction-level data from January 27, 2023, to May 6, covering overcollateralization and automated liquidations.
- Recursive leverage accounted for over 20% of total borrowed volume and involved repeated borrowing against collateral.
- Liquidations were concentrated in four assets, which made up about 90% of total liquidated value.
- Liquidation fees ranged from 5% to 10%, with overall borrower losses during events estimated at up to 30%.
The findings indicate that while Aave V3’s design effectively prevented unrecovered lender losses, it increased risk exposure for borrowers during market downturns. The reliance on automated risk controls necessitated higher collateral requirements compared to traditional lending systems.
Overall, Aave V3’s approach has led to significant borrower losses during liquidation events, with estimates suggesting losses could reach as high as 30%. Source
