Who will replace AAVE as the new king?

Author: Tom Wan

Compiled by: Jiahua, ChainCatcher

The lending landscape of Ethereum and Solana follows an extremely similar script, with the only truly comparable phase transition (from the first phase to the second phase) occurring about 25% faster on Solana. The third phase has just begun, and whether Solana can maintain this pace remains uncertain.

• Ethereum's first to second phase (from Compound's peak to Aave establishing an advantage): about 2 years
• Solana's first to second phase (from MarginFi's peak to Kamino establishing an advantage): about 18 months
• Both ecosystems are now in the third phase, with new challengers continuously closing the gap

However, this time, I do not believe the outcome will be the same. The following content will explain the reasons one by one.

Phase One: The Dominance of Compound and MarginFi

Ethereum: Compound is the protocol that truly ignited the "DeFi Summer." The launch of the COMP token in June 2020 directly triggered the entire liquidity mining era, and at its peak, Compound's TVL was about 5 times that of Aave.

Solana: After the collapse of FTX, MarginFi launched a long-term points program centered around future airdrops, successfully attracting a large amount of capital, with its peak TVL being about 4 times that of Kamino.

The TVL lead of these two early dominators relied on token incentives and airdrop expectations, rather than true product depth. Once the market turns, this distinction becomes crucial.

Phase Two: The Rise of Aave and Kamino

Ethereum: Compound's TVL is essentially mercenary capital. When the bear market hit in 2022, the value of collateral plummeted, and COMP collapsed simultaneously, with mining rewards no longer sufficient to retain capital.

The damage to trust actually occurred earlier— in September 2021, a governance vulnerability led to the excessive distribution of about $90 million in COMP, and users tend to remember such events for a long time. The final fatal blow came in 2023 when founder Robert Leshner publicly announced a shift in focus to Superstate, indicating that the core team had mentally abandoned the protocol.

Aave defeated Compound for several closely connected reasons. It quickly launched new collateral types, especially stETH, wstETH, and weETH, making it the default venue for Ethereum LST circular lending. It began cross-chain expansion early, completing deployments on Polygon and Avalanche through native partnerships.

Pure incentives often deplete token treasuries or crush token prices, but cooperative public chains allowed Aave to achieve compounding growth of users and TVL without exhausting its own budget.

It also possesses real product depth: flash loans (which Compound never launched) and a security module (which gives AAVE tokens real demand through staking). Today, Aave's TVL is about $16 billion, while Compound's is only about 10% of that.

Solana: The decline of MarginFi stemmed from a prolonged airdrop activity. Users provided liquidity, waiting for a token that was repeatedly delayed and ultimately concluded under unacceptable conditions, leading to frustration that evolved into a collective exit.

Kamino's victory is more structural than incentive-driven. It was not initially a lending protocol but a management tool built around concentrated liquidity vaults, with the lending market growing alongside it.

During the Solana DeFi revival from 2023 to 2024, new assets emerged intensively—LSTs (jitoSOL, bSOL), yield tokens (JLP), stablecoins (PYUSD)—and Kamino's positioning was just right: it has management vault products for DEX liquidity, a lending market that provides utility for new assets, and a Multiply product designed specifically for circular lending.

All of this made Kamino the preferred venue for asset issuers to deploy incentives on Solana—if you are issuing a new LST or stablecoin on-chain, Kamino is often your first integration target.

Today, Kamino's TVL is about $1.6 billion, while MarginFi is about $45 million, only 3% of the former.

Kamino's TVL is primarily driven by the integration of new LSTs, stablecoins, and yield-bearing assets.

Phase Three: The Emergence of Morpho and Jupiter Lend

This month, both Aave and Kamino faced external shocks. Kamino had no direct risk exposure to the Drift incident (dSOL was unaffected by the hack), but depositors still withdrew about $300 million as a precaution.

Aave faced a heavier impact—rsETH was widely used as collateral for circular lending on Aave, with TVL dropping from about $26 billion to about $16 billion.

The ratio changes are as follows:

• Morpho's TVL ratio to Aave: increased from 26% to 42%
• Jupiter Lend's TVL ratio to Kamino: increased from 50% to 60%

Top protocols suffering external shocks does not equate to being eliminated by competition. This reveals a hidden truth in the lending space: leading projects hold the most trusted collateral (weETH, rsETH, JLP) precisely because they are leaders, and everyone tends to integrate with the winners.

In favorable conditions, this concentration drives TVL growth; however, when an integrated asset encounters problems, the leaders suffer the most severe blows due to their own success. At this point, the challengers' data looks good simply because they have smaller risk exposures—this is an illusion caused by lagging indicators, not a structural advantage.

Why I Don't Think This Time the Outcome Will Be the Same

The foundations of the existing dominators are indeed very solid. Both Compound and MarginFi are self-destructive: Compound failed due to slow governance and founder departure, while MarginFi failed due to unmet airdrop promises.

Morpho is infrastructure, Aave is a product. Morpho Blue provides an immutable, permissionless market creation mechanism, with curators (Gauntlet, Steakhouse, MEV Capital) managing vault risks.

Aave is a single giant fund pool managed through governance for listing new tokens—equivalent to a super curator. The logic behind Morpho's bet is that risk management should be decoupled and white-labeled, rather than creating a better Aave.

Jupiter Lend is a feature of a super application, while Kamino is an independent product. Jupiter keeps users within its ecosystem, covering DEX aggregation, perpetual contracts, prediction markets, stablecoins, LSTs, and now lending.

Users do not need the best rates on Jupiter Lend; they just need to obtain sufficient rates in a familiar place. Its moat is the distribution channel, not the product itself.

What Would Change My Judgment

• Aave v4's modular architecture fails to gain substantial market recognition, and Aave v3 becomes marginalized.
• One of Kamino's largest collateral types, PRIME, experiences a collapse. Currently, the PRIME market accounts for 20% of the protocol's overall scale.

Core Lessons for Protocol Growth

Relying solely on self-incentives cannot expand the lending market. The success of Aave and Kamino is built on growing together with ecosystem partners (public chains and asset issuers); pure incentive spending often depletes budgets or crushes tokens before product depth is formed.

In the early stages, the speed of narrative and the execution of business development (BD) are more important than protocol depth.

Aave was the first to launch stETH, wstETH, and weETH, followed by collaborations with Ethena for sUSDe circular lending, with Maple for syrupUSDC, and with Pendle for PTs.

Kamino was the first to integrate almost every major Solana LST and stablecoin as they emerged. In both cases, the rapid capture and execution of narratives have been the true core competitive advantage over the years.