In this comparison
Overview
Aave and Compound are the two original DeFi lending protocols. Compound pioneered the model in 2018: deposit assets into a pool, earn variable interest. Borrowers take from the pool by posting collateral. Interest rates adjust algorithmically based on utilization. It was elegant and revolutionary.
Aave launched in 2020 and quickly surpassed Compound. Where Compound kept things simple, Aave added features: flash loans, stable rate borrowing, multi-collateral positions, and aggressive multi-chain deployment. Today Aave holds over $15 billion in TVL across 10+ chains while Compound sits around $2-3 billion, primarily on Ethereum.
Both protocols are battle-tested, well-audited, and have survived every market crisis without losing depositor funds. The question is not which is "safe" (both are) but which offers the better combination of rates, features, and chain support for your needs.
Aave vs Compound: Side-by-Side
| Category | Aave | Compound |
|---|---|---|
| Launch Year | 2020 | 2018 |
| TVL | $15B+ | $2-3B |
| Supported Chains | 10+ (ETH, Arb, OP, Polygon, etc.) | Ethereum mainnet (primarily) |
| Current Version | V3 | V3 (Comet) |
| Flash Loans | Yes | No |
| Stable Rate Borrowing | Yes (limited) | No |
| Governance Token | AAVE | COMP |
| Supported Assets | 100+ across all chains | 20-30 |
| GHO Stablecoin | Yes (Aave-native) | No |
| Audit Count | 20+ (across versions) | 15+ |
Lending Rates
Rates on both protocols are variable and driven by supply and demand. When lots of people want to borrow USDC, the rate goes up. When demand is low, rates drop. Neither protocol "sets" rates. The algorithm does.
In practice, Aave tends to have slightly better supply rates for lenders because of its deeper liquidity and higher utilization. Compound V3 (Comet) focused on single-asset markets (primarily USDC), which can offer competitive rates for that specific asset.
Morpho, which optimizes rates on top of both protocols, shows that the base-rate differences are usually small (0.1-0.5% APY). The bigger differences come from which assets are available, which chains are supported, and what features you need.
Features and Flexibility
Aave V3 is packed with features. Efficiency Mode (e-mode) gives higher loan-to-value ratios for correlated assets (like borrowing USDC against USDT). Isolation mode lets new assets be listed with limited risk exposure. Cross-chain portals enable moving positions between chains. Flash loans let developers borrow any amount with zero collateral as long as it is repaid in the same transaction.
Aave also launched GHO, its own stablecoin that can be minted by borrowers at a set rate. AAVE stakers get discounted GHO borrowing rates.
Compound V3 went the opposite direction: simplification. Comet uses a single-borrowable-asset model per market. The USDC market on Ethereum is the flagship. You deposit various collateral types and borrow USDC only. This simplification reduces attack surface and makes the protocol easier to reason about.
If you want flexibility and features, Aave leads. If you want a focused, simple lending experience for USDC, Compound V3 delivers clean execution.
Multi-chain Deployment
Aave V3 is deployed on Ethereum, Arbitrum, Optimism, Polygon, Avalanche, Base, BNB Chain, Metis, Scroll, and more. This aggressive multi-chain strategy means you can lend and borrow on your preferred network with liquidity already available.
Compound is primarily on Ethereum mainnet. Compound V3 has deployments on Polygon, Arbitrum, and Base, but liquidity is concentrated on Ethereum. If you operate on Solana, Avalanche, or newer L2s, Compound may not be available.
For multi-chain DeFi users, Aave's breadth is a clear advantage. Compound's Ethereum-first approach works well if Ethereum mainnet is your primary chain.
Security Track Record
Both protocols have exceptional security records. Neither has lost user funds due to a smart contract exploit on their main markets. This is remarkable given that they collectively hold tens of billions in deposits.
Aave has undergone 20+ audits across its versions. The protocol has a bug bounty program and active governance that reviews risk parameters regularly. The wider feature set does create more attack surface, but the audit coverage is correspondingly extensive.
Compound is one of the most audited DeFi protocols in existence. Its simpler design means fewer things can go wrong. The "less is more" philosophy has served it well. Compound V3's single-asset market model further reduces complexity.
Both have had governance-related incidents (wrong parameters, token distribution bugs) but no exploits that drained user deposits. For risk-conscious users, both are tier-one DeFi protocols.
Governance and Tokenomics
AAVE token holders govern Aave protocol. They vote on risk parameters, asset listings, and protocol upgrades. AAVE can be staked in the Safety Module as insurance for the protocol. Staked AAVE earns rewards but is subject to slashing if the protocol needs to cover a shortfall.
COMP token holders govern Compound. The token was famously airdropped to early users and kicked off the "yield farming" movement in DeFi Summer 2020. COMP governance is active but the community is smaller than Aave's.
AAVE has stronger tokenomics with staking utility and plans for revenue sharing through GHO. COMP's value proposition is pure governance without additional utility. Market cap reflects this: AAVE trades at a significant premium to COMP.
Who Uses What
Aave attracts more institutional and professional DeFi users because of its depth, features, and multi-chain presence. Major DeFi strategies involving looping, leverage, and cross-protocol composability typically route through Aave.
Compound appeals to users who want simplicity and a conservative approach. The Compound V3 USDC market is particularly popular among users who just want to lend stablecoins and earn yield without managing multiple collateral types.
Both protocols serve as critical infrastructure. DeFi aggregators, yield optimizers, and strategy vaults build on top of both. Many users interact with Aave and Compound indirectly through these higher-level products.
The Verdict
Aave is the more complete lending platform with deeper liquidity, more features, more chains, and a stronger token. Choose Aave if you want flexibility, multi-chain access, or advanced features like flash loans and efficiency mode. Choose Compound if you prefer simplicity, want to lend USDC on Ethereum with minimal complexity, or value the protocol's conservative approach to risk. Both are blue-chip DeFi. You can not go wrong with either.
Frequently Asked Questions
Which has better lending rates, Aave or Compound?
Rates fluctuate and are often similar. Aave tends to have slightly better rates for lenders due to higher utilization. Compound V3 can be competitive for USDC specifically. Check both in real-time. Morpho optimizes rates across both protocols automatically.
Has Aave or Compound ever been hacked?
Neither has lost user funds from a smart contract exploit on their main markets. Both have had minor governance or parameter issues, but no security breaches that drained deposits. They are among the most audited protocols in all of DeFi.
What is a flash loan?
A flash loan lets you borrow any amount from Aave with zero collateral, as long as you repay it within the same blockchain transaction. If you do not repay, the entire transaction reverts as if it never happened. Flash loans are used for arbitrage, liquidations, and collateral swaps.