When many people mention the cryptocurrency market, they often think it's all speculation and 'air'. However, in reality, many projects already have the capability to serve real market demands and can even operate as compliant companies for value investment. Taking AAVE as an example, this is a decentralized lending protocol where users deposit crypto assets into the protocol to earn interest and can also collateralize to borrow stablecoins for other uses, similar to mortgages in traditional finance.
This model is reminiscent of Fannie Mae, in which Munger once invested. Munger was optimistic about Fannie Mae for two core reasons: first, the scale effect in the lending industry—more users mean a more stable and secure capital pool, which in turn attracts more people to choose leading platforms due to safety; packaging mortgages into financial products to sell to investors. This aligns with AAVE's development logic, as AAVE also has a leading effect and earns the interest spread between borrowers and suppliers through smart contracts. After Munger invested in Fannie Mae, he gained a 10-fold return, while AAVE started from a low of $30 in this cycle and has also reached a 10-fold increase.
In this cycle, projects on Ethereum like Uniswap (decentralized exchange) and OpenSea (NFT trading platform) have suffered significant blows, with a large share of transactions being taken by high-speed public chains represented by Solana and Sui. The insistence on decentralization by Ethereum has led to high gas fees. Most users trading these small images and memes are primarily casual investors who do not consider the safety of their funds and are thus very concerned about transaction fees. In contrast, AAVE is mainly used by larger players, with substantial loans made; they won’t switch to chains like Solana and Sui due to minor transaction fees, risking being hacked. Therefore, AAVE's key metrics like TVL, trading volume, and revenue have already surpassed those during the DeFi craze in 2021, appearing out of place against Ethereum's great depression.
Compared to the fierce competition among various public chains in the cryptocurrency market, many projects experience price halving or even plummeting after one cycle, making it hard to recover. However, simple and stable essential services like lending are more likely to withstand market fluctuations and achieve long-term development—just like the fundamentals in traditional finance.
