Who will replace AAVE to become the new king?

Author: Tom Wan

Translated by: Jiahui, ChainCatcher

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

• Ethereum from Phase 1 to Phase 2 (from Compound peak to Aave establishing dominance): about 2 years
• Solana from Phase 1 to Phase 2 (from MarginFi peak to Kamino establishing dominance): about 18 months
• Both ecosystems are now in the third phase, with new challengers continuously narrowing the gap

But this time, I don’t believe the ending will be the same. The following will explain why, one by one.

Phase 1: The Dominance of Compound and MarginFi

Ethereum: Compound is the protocol that truly ignited the “DeFi Summer.” In June 2020, the COMP token launched, directly sparking the era of liquidity mining. At its peak, Compound’s TVL was about five times that of Aave.

Solana: After the FTX collapse, MarginFi launched a long-term staking plan centered around future airdrops, successfully attracting a large amount of capital. Its peak TVL was roughly four times that of Kamino.

The early dominance of these two ecosystems was driven by token incentives and airdrop expectations, not genuine product depth. Once the market shifted, this difference became critically important.

Phase 2: The Rise of Aave and Kamino

Ethereum: The TVL of Compound was essentially funded by mercenaries; when the 2022 bear market arrived, collateral values plummeted, and COMP collapsed in tandem. Mining yields were no longer sufficient to retain capital.

Trust was damaged even earlier— in September 2021, a governance vulnerability led to an over-distribution of about $90 million worth of COMP, an event users remember for a long time. The final blow came in 2023 when founder Robert Leshner publicly announced shifting focus to Superstate, and the core team had mentally given up on the protocol.

Aave defeated Compound for several closely related reasons. It was quick to list new collateral types, especially stETH, wstETH, and weETH, making it the default platform for Ethereum LST (Liquid Staking Token) lending. It also began cross-chain expansion early on, deploying natively on Polygon and Avalanche through partnerships.

Pure incentives often deplete token reserves or crush token prices, but collaboration with other blockchains allowed Aave to achieve compound growth in users and TVL without exhausting its own budget.

It also offers genuine product depth: flash loans (which Compound never launched) and security modules (creating real demand for AAVE tokens through staking). Today, Aave’s TVL is about $16 billion, while Compound’s is roughly only 10% of that.

Solana: The decline of MarginFi stemmed from a prolonged airdrop campaign. Users provided liquidity, waiting for a token that was repeatedly delayed and ultimately launched under unacceptable conditions. Frustration eventually led to collective withdrawal.

Kamino’s victory was more structural than incentive-driven. It was not originally a lending protocol but a management tool built around centralized liquidity vaults, with the lending market emerging later as it grew.

During Solana’s DeFi revival from 2023 to 2024, new assets flooded in—LSTs (jitoSOL, bSOL), yield tokens (JLP), stablecoins (PYUSD)—and Kamino’s positioning was perfect: it offered vault products managing DEX liquidity, lending markets for new assets to gain utility, and Multiply products designed for cyclical lending.

All this made Kamino the first choice for asset issuers deploying incentives on Solana—if you’re issuing new LSTs or stablecoins on-chain, Kamino is often your first integration.

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

Kamino’s TVL is mainly driven by integrating new LSTs, stablecoins, and interest-bearing assets.

Phase 3: The Emergence of Morpho and Jupiter Lend

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

Aave was hit harder—rsETH, widely used as collateral for cyclical lending on Aave, saw its TVL drop from about $26 billion to roughly $16 billion.

The ratio changes are as follows:

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

External shocks to leading protocols do not necessarily mean they will be eliminated by competitors. This reveals a hidden truth in the lending field: the top projects hold the most trusted collateral (weETH, rsETH, JLP), precisely because they are leaders, and everyone tends to integrate with the winners.

In good times, this concentration drives TVL growth; but when an integrated asset encounters issues, the leaders suffer the most because of their success. Challengers’ data may look good only because their risk exposure is smaller—an illusion caused by lagging indicators, not structural advantages.

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

The existing giants are truly well-established. Both Compound and MarginFi are self-destructive: Compound failed due to slow governance and founder departure; MarginFi failed due to unfulfilled airdrop promises.

Morpho is infrastructure, Aave is product. Morpho Blue provides an immutable, permissionless market creation mechanism, managed by curators (Gauntlet, Steakhouse, MEV Capital) who each handle vault risks.

Aave is a single massive liquidity pool, managing tokens through governance—like a super-curator. Morpho’s logic is that risk management should be decoupled and white-labeled, not about building a better Aave.

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

Users don’t need Jupiter Lend’s interest rates to be the best across the network; they just need to get sufficient rates in familiar places. Its moat is distribution channels, not the product itself.

What could change my judgment

• Aave v4’s modular architecture fails to gain substantial market recognition, and Aave v3 is marginalized.
• One of Kamino’s largest collateral types, PRIME, experiences a major failure. Currently, PRIME accounts for 20% of the protocol’s total scale.

Core Lessons from Protocol Growth

Relying solely on incentives cannot grow a lending market. The success of Aave and Kamino is built on co-growth with ecosystem partners (blockchains and asset issuers). Pure incentive spending often exhausts budgets or crushes tokens before product depth is achieved.

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

Aave was the first to list stETH, wstETH, weETH, then partnered with Ethena for sUSDe, with Maple for syrupUSDC, and with Pendle for PTs.

Kamino, in nearly every major Solana LST and stablecoin launch, was the first to integrate. In both cases, rapid narrative capture and execution have been the core competitive advantages for many years.