According to DefiLlama, Aave’s total value locked stands at approximately $24 billion across all chains as of May 2026, making it the largest decentralized lending protocol by TVL. Compound’s total value locked, per DefiLlama, is approximately $2.1 billion across all deployments over the same period. The 11x gap masks a deeper question: Aave Companies and Compound Labs now pursue almost opposite design philosophies, and your best protocol depends entirely on whether you are a borrower, supplier, DAO participant, or stablecoin issuer.
Aave V3 runs across Ethereum, Arbitrum, Optimism, Polygon, Avalanche, Base, BNB Chain, Metis, Gnosis Chain, and Scroll, with each deployment governed through cross-chain governance messages from Ethereum mainnet. Compound III is deployed on Ethereum, Polygon, Arbitrum, Base, Optimism, Mantle, Scroll, Linea, Unichain, and Ronin.
Key Takeaways
- Aave holds approximately $24 billion in total value locked as of May 2026, the largest figure among decentralized lending protocols.
- Compound holds approximately $2.1 billion in total value locked across all Compound III deployments and remaining V2 markets.
- Compound III uses 1 borrowable base asset per market (examples include USDC, WETH, USDT, and USDS), alongside a list of supported collateral assets.
- Aave V3 suppliers receive aTokens that accrue interest in real time directly in the user’s wallet, with each aToken pegged 1:1 to the underlying asset.
- GHO, Aave’s overcollateralized stablecoin, has a circulating supply of approximately $290 million as of May 2026, with interest accruing entirely to the Aave DAO treasury.
- The maximum supply of AAVE is 16,000,000 tokens. The maximum supply of COMP is 10,000,000 tokens.
- Aave runs an Immunefi bug bounty with payouts up to $1,000,000 for critical vulnerabilities. Compound runs an Immunefi bounty with a maximum payout of $500,000.
Editor’s Choice
- The Aave Safety Module holds over $400 million in staked AAVE and stkABPT, providing a slashable backstop against shortfall events.
- Compound’s proposal threshold sits at 25,000 COMP delegated to a single address before that address can submit an on-chain proposal.
- Aave V4 introduces a Hub-and-Spoke unified liquidity layer, automated interest rate management, and dynamic risk premiums based on borrow duration.
- Aave V3 liquidation bonuses typically range from 5% to 10% depending on the asset.
- Compound III defines 2 thresholds per collateral asset: a borrow collateral factor and a separate liquidation collateral factor, with liquidation triggered at the higher LCF threshold.
- Aave V3 underwent independent reviews by 5 firms: Trail of Bits, OpenZeppelin, ABDK Consulting, SigmaPrime, and a Certora formal verification engagement.
- Both Aave V3 and Compound III rely on Chainlink Price Feeds as their primary oracle source for collateral valuation.
Aave Protocol Overview
The Aave Protocol is a decentralized non-custodial liquidity protocol where users participate as suppliers, borrowers, or liquidators, with suppliers earning interest by providing liquidity and borrowers taking overcollateralized loans. According to DefiLlama, as of May 2026, Aave’s total value locked sits at approximately $24 billion across all chains, with Aave V3 accounting for the majority of TVL while Aave V2 sits in deprecation mode. Aave V3 is deployed across 10 EVM-compatible chains with cross-chain governance routing proposals from Ethereum mainnet to each downstream chain.
When a user supplies an asset to Aave, they receive an aToken in return, which is a yield-bearing token that represents their position and accrues interest in real time directly in the user’s wallet. Aave V3 supports E-Mode for correlated assets, isolation mode for new listings, supply caps, borrow caps, and a siloed borrowing mode for risky assets. The aToken model integrates natively with self-custody wallet ecosystems, and the protocol routes a portion of borrow interest to the Aave DAO treasury, which funds Safety Module rewards, grants to risk service providers, and protocol upgrades.
By the numbers: Per DeFi market statistics and DefiLlama, Aave’s $24 billion in TVL spans 10 chains as of May 2026, with the Aave V4 Ethereum launch DAO vote approved in March 2026 and targeted for Ethereum mainnet later this year. The protocol’s footprint covers Ethereum mainnet plus nine additional EVM networks.
Compound Protocol Overview
Compound III is an EVM-compatible protocol that enables supplying of crypto assets as collateral in order to borrow the base asset, where each deployment has a single borrowable asset such as USDC, WETH, USDT, or USDS. Unlike centralized lending venues tracked in crypto exchange statistics, Compound III runs entirely on-chain and routes all interest accrual through smart contracts. Compound’s total value locked is approximately $2.1 billion across all deployments as of May 2026, with Compound III deployed on 10 networks (Ethereum, Polygon, Arbitrum, Base, Optimism, Mantle, Scroll, Linea, Unichain, Ronin) and Compound V2 markets remaining operational on Ethereum but in deprecation mode.
Compound III borrowers must maintain enough collateral value, with respect to each collateral asset’s borrow collateral factor, to cover their borrow position. The Comet contract design represents a meaningful simplification compared to Compound V2: a single base asset per market with a known list of supported collateral assets reduces the surface area for compound risk between markets.
Aave aTokens vs Compound cTokens (and Comet)
Aave aTokens are minted upon deposit and burned when withdrawn, with the aToken’s value pegged 1:1 to the underlying asset and interest accruing in real time directly in the user’s wallet. In Compound III, accounts earn interest by supplying the base asset to the protocol, while each deployment also has a list of collateral assets which can only be supplied to borrow the base asset. This is a structural break from Compound V2, where every supplied asset earned yield via cTokens that traded against an exchange rate.
The two designs answer different questions. Aave’s aToken model lets a single supplier earn yield on every supplied asset across the market, with each aToken minted on deposit and accruing interest directly in the wallet. Compound III’s split between the yield-bearing base asset and the non-yield-bearing collateral isolates collateral risk from base-asset risk, since collateral pricing errors do not directly impair the supplier’s yield.
Key finding: Per OpenZeppelin’s audit of Compound III, the Comet contract’s single-base-asset architecture reduces the surface area for compound risk between markets compared with Compound V2’s matrix model. The audit recommends ongoing monitoring of price oracle delays and absorption parameters as new markets are deployed.
Interest Rate Models Compared
Aave’s interest rate model is algorithmic and adjusts based on the utilization rate of each reserve, using a two-slope curve with an optimal utilization rate beyond which interest rates rise sharply to incentivize repayments. Variable borrow rates on Aave are calculated as the sum of the base variable borrow rate plus slope 1 (below optimal utilization) or slope 2 (above optimal utilization), with each reserve having its own configured optimal utilization rate, base rate, slope 1, and slope 2 parameters set by the Aave DAO.
Compound III uses an interest rate model with a kink, similar in concept to a two-slope curve, where the supply rate and borrow rate are functions of the utilization of the base asset (total amount borrowed divided by total amount supplied). Compound III decouples supply rates from borrow rates more flexibly than Compound V2: the spread between the two is a parameter set by governance, allowing the protocol to capture revenue and build reserves without changing the kink-based curve shape itself.
The practical effect is similar at the curve level but different at the revenue level. Both protocols set rates per market based on utilization. Compound III adds an explicit governance lever on the supply-borrow spread, which means COMP holders can adjust the protocol’s revenue share without altering the steepness of the rate curve. Aave’s revenue routing flows through the reserve factor on each market, set per asset by the Aave DAO.
Collateral, Liquidation, and Risk Engines
On Aave V3, a liquidation is triggered when a borrower’s health factor goes below 1 due to their collateral value not properly covering the value of their loan, with the health factor calculated as the sum of the user’s collateral times the liquidation threshold, divided by the user’s borrow value. When liquidated on Aave V3, up to 50% of a borrower’s debt is repaid by the liquidator, and that value plus a liquidation bonus typically ranging from 5% to 10% depending on the asset is taken from the available collateral.
In Compound III, accounts that fall below the borrow collateral factor threshold are eligible for absorption, the protocol-level action that liquidates an underwater account by transferring its collateral to the protocol and zeroing out its base asset debt. The protocol then sells the absorbed collateral to liquidators at a discount, with the discount sized to ensure rapid clearing of bad debt, and each collateral asset has a borrow collateral factor and a separate liquidation collateral factor with liquidation triggered at the higher LCF threshold.
Aave V3’s E-Mode allows correlated assets such as stablecoins or correlated ETH derivatives to use higher LTV ratios. The two designs reflect their broader architectures: Aave’s per-market health factor + close factor model gives liquidators predictable capture; Compound III’s absorb-then-resell model gives the protocol direct control over the liquidation queue, with a discount that auto-sizes to clear bad debt fast.
Why it matters: Liquidation incentive structures differ materially across the two protocols, scaling with collateral asset risk and bad-debt clearing speed. Aave caps liquidator capture as a fixed bonus on seized collateral, while Compound III hands the absorbed collateral to liquidators at a governance-tunable discount that adjusts with conditions.
Governance: AAVE vs COMP
The maximum supply of AAVE is 16,000,000 tokens, with 13,000,000 distributed to LEND token holders during the migration in 2020 at a 100:1 ratio, and 3,000,000 reserved for the Aave Ecosystem Reserve controlled by AAVE governance. Aave governance is composed of three main components (a voting machine, a payload controller, and a cross-chain controller), and proposals are first signaled on the governance forum and Snapshot before moving on-chain. The Aave Safety Module currently holds over $400 million in staked assets, with up to 30% of those assets slashable to cover a shortfall event.
The COMP token has a fixed maximum supply of 10,000,000 tokens, originally distributed to suppliers and borrowers across Compound V2 markets through a liquidity mining program that began in June 2020. Compound’s governance uses three components (the COMP token, Governor Bravo, and a Timelock), and to create a proposal, an address must have at least 25,000 COMP delegated to it. Compound III continues to distribute COMP rewards to suppliers and borrowers in select markets, with rates set per-deployment by Compound governance, though the active COMP distribution rate has been reduced significantly compared to the V2-era peak.
The economic design reads differently at the token-supply level. Aave’s larger token supply funds an active Safety Module backstop and an Ecosystem Reserve that supports incentives and risk service provider grants. Compound’s smaller token supply, paired with the proposal threshold of 25,000 COMP, concentrates governance among larger holders and delegate addresses.
Stablecoin Strategy: GHO vs USDC Markets
GHO is a decentralized, multi-collateral stablecoin native to the Aave Protocol, pegged to the US Dollar, where users mint GHO by supplying approved collateral on Aave V3, and the interest paid on GHO loans goes directly to the Aave DAO treasury rather than to suppliers. GHO is overcollateralized and minted only by approved Facilitators, the first being the Aave V3 Ethereum Pool, and maintains its peg through the GHO Stability Module, which allows arbitrageurs to swap GHO for USDC or USDT at a fixed price.
GHO circulating supply sits at approximately $290 million as of May 2026, with the GHO interest rate set by the Aave DAO and currently in the range of 7% to 9% APY for borrowers, and a discount of up to 30% available to stkAAVE holders. Interest paid on GHO accrues entirely to the Aave DAO treasury, providing a sustainable revenue stream that is independent of supply-side yield distribution.
Compound III treats USDC, USDT, and USDS as base assets across its market deployments, alongside WETH-based markets. Rather than issuing its own stablecoin, the protocol uses third-party stablecoins as borrowable base assets per chain. The result is two protocols that both depend on stablecoin demand for revenue, but capture it differently: Aave earns the borrow rate spread between protocol-owned debt and supplier yield, while Compound earns the governance-set spread on third-party stablecoin markets.
Audits, Oracles, and Bug Bounties
Aave V3 underwent independent reviews by Trail of Bits, OpenZeppelin, ABDK Consulting, SigmaPrime, and a Certora formal verification engagement, covering the core lending pool, aToken and debt token contracts, the interest rate strategy, the liquidation engine, the cross-chain bridge components, and the price oracle integration. OpenZeppelin completed multiple audit phases of Compound III (Comet), covering the Comet core contract, the Configurator, the bulker, and the rewards contract, with critical findings addressed prior to mainnet deployment.
Both Aave V3 and Compound III rely on Chainlink Price Feeds as their primary oracle source, which aggregate data from multiple data providers and source exchanges and update on-chain when either a deviation threshold or heartbeat interval is met. Heartbeat intervals on Chainlink Price Feeds are typically 1 hour for major assets such as ETH/USD and 24 hours for stablecoin pairs.
The Aave Protocol bug bounty program on Immunefi offers rewards up to $1,000,000 for critical vulnerabilities in Aave V3 smart contracts, including the lending pool, aTokens, debt tokens, the GHO stablecoin contracts, and the cross-chain governance infrastructure. The Compound Finance bug bounty on Immunefi offers a maximum payout of $500,000 for critical vulnerabilities in the Compound III Comet contracts, the Comet Rewards contract, the Bulker, and the Configurator. The 2x bounty cap differential reflects the relative TVL gap between the two protocols, which sets the upper bound on what an attacker could profitably extract. Bounty caps and audit cadence are useful baseline indicators alongside broader cryptocurrency security and fraud statistics when assessing smart-contract risk.
Head-to-Head Comparison Table
Per DefiLlama’s protocol pages, Aave V3’s approximately $24 billion in TVL outsizes Compound III’s approximately $2.1 billion across all deployments. The row-by-row comparison shows the gap is smaller on architecture, oracle dependency, and governance plumbing than it is on raw scale alone.
| Dimension | Aave V3 | Compound III (Comet) |
| Total value locked (May 2026) | ~$24 billion | ~$2.1 billion |
| Architecture | Multi-asset pools per market | Single base asset + collateral list |
| Chain deployments | 10 EVM chains | 10 EVM chains |
| Supplier token | aToken (rebasing) | Base-asset receipt only |
| Interest rate model | Two-slope kink, per-asset | Kink with governance-set spread |
| Liquidation trigger | Health factor < 1 | Borrow CF / LCF threshold |
| Liquidator incentive | 5% to 10% bonus on collateral | Discount on absorbed collateral |
| Governance token max supply | 16,000,000 AAVE | 10,000,000 COMP |
| Proposal threshold | Snapshot signal + on-chain | 25,000 COMP delegated |
| Native stablecoin | GHO (overcollateralized) | None (uses USDC, USDT, USDS) |
| Backstop | Safety Module ($400 million+ staked) | None comparable |
| Bug bounty cap | $1,000,000 | $500,000 |
Source: Aave docs, Compound docs, DefiLlama, Immunefi (May 2026)
Verdict by Use Case
Per DefiLlama and the protocol documentation, Aave V3 wins on TVL scale at approximately $24 billion and on collateral matrix breadth across 10 chains, while Compound III wins on architectural simplicity and per-market risk isolation. Your best protocol depends on which of the 5 use cases below you fit, not on the headline TVL gap.
Best for borrowers seeking the broadest collateral matrix: Aave V3. Aave V3 supports E-Mode, isolation mode, supply caps, borrow caps, and a siloed borrowing mode for risky assets, deployed across 10 EVM-compatible chains. If a borrower wants to post a long tail of collateral types in a single market, Aave’s matrix model fits.
Best for borrowers seeking simpler, isolated risk per market: Compound III. The Comet contract’s single-base-asset architecture reduces the surface area for compound risk between markets, with each market deployment having its own list of supported collateral assets. Borrowers who want to know exactly which assets back their loan, with no exposure to other markets’ parameter changes, get a cleaner mental model on Compound III. The split between borrower mental models is one factor visible in broader retail investing statistics on DeFi participation.
Best for stablecoin issuers and DAO-treasury exposure: Aave (via GHO). GHO is a decentralized, multi-collateral stablecoin where the interest paid on GHO loans goes directly to the Aave DAO treasury, with peg integrity managed through the GHO Stability Module. DAOs that want to support and integrate a native protocol-owned stablecoin can plug into GHO directly.
Best for governance participants who want concentrated voting weight: Compound. Compound’s proposal threshold of 25,000 COMP delegated to a single address concentrates the proposal surface among larger delegates. Aave’s broader holder base, paired with 13,000,000 AAVE in circulation from the original LEND migration, distributes voting weight across more wallets.
Best for users who value protocol-level insurance: Aave V3. The Aave Safety Module’s over $400 million in staked assets, with up to 30% slashable, provides a protocol-level backstop that Compound III does not have a direct equivalent for.
Frequently Asked Questions (FAQs)
Aave’s total value locked sits at approximately $24 billion as of May 2026, while Compound’s TVL is approximately $2.1 billion across all deployments. The roughly 11x gap reflects Aave’s larger asset matrix, more chains, and earlier multi-chain expansion. Both protocols generate fees from borrow interest paid by users, with portions routed to their respective DAO treasuries.
Aave aTokens are yield-bearing tokens minted on deposit and pegged 1:1 to the underlying asset, with interest accruing in real time in the user’s wallet. Compound III uses a different model: each market has a single borrowable base asset, and accounts earn interest by supplying the base asset, while each deployment has a list of collateral assets which can only be supplied to borrow the base asset. The Compound III split isolates collateral risk from base-asset risk.
Compound III uses USDC, USDT, and USDS as examples of base assets in its market deployments. The protocol does not issue its own stablecoin. Aave’s GHO is a decentralized, multi-collateral stablecoin pegged to the US Dollar, with interest paid on GHO loans flowing to the Aave DAO treasury rather than to suppliers.
Both protocols use overlapping audit firms but with different scopes. Aave V3 underwent independent reviews by Trail of Bits, OpenZeppelin, ABDK Consulting, SigmaPrime, and a Certora formal verification engagement before launch. OpenZeppelin completed multiple audit phases of Compound III, covering the Comet core contract, the Configurator, the bulker, and the rewards contract.
Both Aave V3 and Compound III rely on Chainlink Price Feeds as their primary oracle source for valuing collateral and borrowed assets, with Chainlink updates triggered by deviation thresholds or heartbeat intervals. Heartbeat intervals are typically 1 hour for major assets such as ETH/USD and 24 hours for stablecoin pairs. Both protocols apply additional sanity checks on top of Chainlink prices for added security.
On Aave V3, liquidation triggers when a borrower’s health factor falls below 1, with up to 50% of debt repaid by the liquidator, who captures a bonus typically between 5% and 10% on the seized collateral. On Compound III, accounts that fall below the borrow collateral factor threshold are eligible for absorption by the protocol, which then sells the absorbed collateral to liquidators at a discount sized to ensure rapid clearing of bad debt.
Conclusion
Aave and Compound began with similar premises and now sit at opposite ends of DeFi-lending design. Aave’s approximately $24 billion TVL and 10-chain footprint reflect a multi-asset, multi-chain super-protocol strategy, augmented by approximately $290 million of GHO supply and a Safety Module holding over $400 million in staked assets. Compound’s approximately $2.1 billion TVL reflects a deliberate simplification through Compound III’s single-base-asset markets and isolated collateral risk.
Borrowers who want the widest collateral options fit Aave V3’s matrix model; users who value market-isolated risk and a leaner contract surface fit Compound III. DAOs evaluating stablecoin integrations get GHO’s overcollateralized model; governance participants weighing influence per token can read the 25,000 COMP proposal threshold against AAVE’s broader holder distribution. The Aave bounty paying up to $1,000,000 and the Compound bounty with a maximum payout of $500,000 give attackers a measurable upper bound on disclosed-vs-exploited capture.
