The risks that may threaten the Aave protocol despite its dominance in the decentralized lending market:
High dominance: Aave controls about 50% of the DeFi lending market, with a total value locked of $36.7 billion, making it the backbone of the system.
Governance risks: The protocol is largely managed by its founder Stani Kulechov, raising concerns about power concentration and personal influence on decisions.
User concentration: The proportion of large depositors (over $100,000 in collateral) has increased from 29% to 37%, while the share of small users has shrunk, increasing the risk of liquidity shocks if these large depositors withdraw suddenly.
Overexpansion: Aave has expanded across 16 chains, some of which are operating at a loss, putting pressure on technical and financial resources.
Potential repercussions: Any disruption in Aave (governance, liquidity, expansion) could harm market confidence and destabilize the DeFi ecosystem as a whole.
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