Delphi Digital: Aave's three core markets have structural problems, and annualized losses of about $52 million are unnecessary

Comparing news, Delphi Digital stated in its latest post that WETH, USDT, and USDC are the three largest lending markets in the Aave Ethereum market, accounting for 89% of the total borrowing volume. Supply interest rates in these three markets were about 25%-35% lower than borrowing rates, and the resulting deadweight loss (Deadweight Loss) was about $52 million, close to half of Aave's first quarter annualized revenue. Even if the Reserve Factor (Reserve Factor) were completely eliminated, there would still be a loss of approximately $36 million.

Delphi believes that Aave's peer-to-pool model has obvious structural flaws here. The attack on the KelpDAO bridge on April 18 further revealed this issue. The attackers used $292 million RsETH for leveraged loans on Aave, causing Aave to generate nearly $200 million in bad debts, and freeze 100% utilization of major markets such as WETH for 5 days.