Aave’s TVL Surpasses Banks, But Token Remains Undervalued

Aave, a leading decentralized finance (DeFi) lending protocol, has achieved a Total Value Locked (TVL) of $41.1 billion as of August 24, 2025, placing it among the top 50 U.S. commercial banks by depositstitle4^[4]. This figure surpasses the deposit balances of institutions like Deutsche Bank and Barclaystitle1^[1], underscoring Aave’s growing influence in bridging traditional finance and blockchain-based solutions. The protocol’s TVL has shown explosive growth, doubling in 2025 alone to reach this milestonetitle4^[4]. By September 1, 2025, Aave’s TVL remained stable at $39.2 billion, demonstrating strong capital retention despite market fluctuationstitle4^[4].

Aave’s dominance in the DeFi lending market is unparalleled, commanding 62% of the sector’s market share as of September 2025title2^[2]. This leadership is driven by competitive liquidity structures, cross-chain expansion to networks like Aptos, and strategic partnerships with institutions such as Fireblockstitle1^[1]. The protocol’s active loans peaked at $29 billion in August 2025, reflecting sustained demand for on-chain leveragetitle4^[4]. Aave’s institutional-grade security and integration of real-world assets (RWAs) through its Horizon initiative have further solidified its appeal to both retail and institutional userstitle1^[1].

The protocol’s revenue model, which includes 0.09% flash loan fees and liquidation income, generated $91.4 million in monthly fees and $12.8 million in revenue in August 2025title4^[4]. Over three years, Aave has collected over $1 billion in fees, outpacing its closest competitors by more than fivefold. These metrics highlight Aave’s ability to capture value through diverse income streams, with fees often outpacing its fully diluted valuation (FDV) as a forward-looking indicatortitle3^[3].

Aave’s cross-chain expansion and technological innovation have positioned it as a leader in the DeFi ecosystem. By adopting the Move programming language and extending its reach to networks like Aptos, Aave has improved scalability and transaction efficiencytitle1^[1]. Collaborations with institutions such as World Liberty Financial have bolstered its credibility and market presencetitle1^[1]. Additionally, the protocol’s native stablecoin, GHO, has seen rapid adoption, with a circulating supply of $302 million as of August 2025title1^[1].

Despite its strong fundamentals, Aave’s native token, AAVE, has traded at a 20% discount to its December 2024 peak of $399.85 as of September 2025title4^[4]. Analysts suggest this disconnect between protocol performance and token valuation could indicate undervaluation, particularly as institutional liquidity rotates from Bitcoin to altcoinstitle4^[4]. Aave’s position as a leading DeFi protocol, combined with its robust revenue streams and expanding ecosystem, positions it to capitalize on this liquidity shifttitle4^[4].

The implications of Aave’s growth extend beyond DeFi, challenging traditional banking models. With a TVL rivaling that of major U.S. banks and a revenue model that outperforms centralized counterparts, Aave exemplifies how blockchain technology can offer superior yields and decentralized infrastructuretitle1^[1]. As DeFi continues to mature, protocols like Aave are redefining financial services, providing scalable, secure, and accessible alternatives to traditional systemstitle1^[1].