Aave
Crypto Overview
Overview and Intended Utility
Aave is a decentralized lending protocol that enables users to lend and borrow cryptocurrencies. The AAVE token serves as a governance token, allowing holders to vote on protocol changes and participate in the platform's decision-making process. It also provides holders with discounted fees and other benefits within the Aave ecosystem.
Business Model Analysis
The protocol generates revenue through fees charged on borrowing activities and liquidations. While the base technology of asset lending is innovative, the core revenue model involves interest-bearing activities, which raises significant Shariah compliance concerns.
Real-World Adoption and Usage
Aave has achieved substantial adoption, with over $5 billion in total value locked (TVL) as of 2024. The protocol is actively used by both individuals and institutions for lending and borrowing activities. The development team maintains regular updates and improvements to the protocol.
Token Distribution and Governance
The token distribution shows a relatively fair allocation: 16% to founders and team (with vesting), 3% to advisors, and the majority distributed to the community through various mechanisms. The project demonstrates strong development activity with regular updates and improvements.
Revenue Model and Operations
The primary concern from an Islamic finance perspective is that the core business model revolves around interest-based lending and borrowing. While the technical implementation is innovative and the governance structure is sound, the fundamental activity of charging interest (riba) on loans is problematic under Shariah law.
Crypto Impact
To assign a comfort level investing in Aave from a halal perspective we need to determine whether it has a net positive or negative impact.
Towards this end, the table below is used to tally all the positive and negative considerations our members can think of related to Aave.
If you don’t see something that should be listed, positive or negative, feel free to submit your own contribution using the button “Contribute”.
We will review your contribution for accuracy before publication.
Importantly, you can review listed contributions and vote on which one you think has the greatest impact, positive or negative.
You only have one vote per asset so use it wisely.
You can change your vote if you change your mind.