The crypto market is currently dominated by meme coins, drawing investor attention away from fundamental, utility-driven sectors like decentralized finance (DeFi). Despite the broader market reaching new highs, DeFi’s total value locked (TVL) stands at approximately $182 billion—still about 40% below its peak of $300 billion in late 2021. This lag highlights a growing divergence: while speculative assets surge, core infrastructure protocols continue operating beneath the surface, generating real yield and underpinning market liquidity.
Yet DeFi remains one of the few sectors in crypto capable of producing sustainable, on-chain revenue. Protocols such as Aave, MakerDAO, and Uniswap consistently rank among the top seven by TVL and serve as foundational pillars of the ecosystem. These OG projects have evolved through multiple market cycles, adapting to changing conditions while maintaining security, decentralization, and innovation.
But how are they staying relevant in an era of rapid hype cycles? What major upgrades are shaping their future? And do they still hold growth potential?
This article dives deep into the latest developments from Aave and MakerDAO, two of DeFi’s most influential pioneers, exploring their current status, recent upgrades, and long-term strategic visions.
Aave: Reinventing Lending with Security and Incentives
Current Status
Launched originally as ETHLend in 2017, rebranded to Aave in 2018, and deployed on Ethereum in 2019, Aave has evolved into one of the most trusted lending protocols in DeFi. With the release of Aave V3 in March 2022, it introduced cross-chain borrowing, enhanced capital efficiency, isolated asset pools, improved liquidation mechanisms, and multi-reward token support.
Today, Aave ranks as the second-largest DeFi protocol by TVL—nearly $22 billion—trailing only Lido. It operates across 12 blockchain networks, offering a permissionless platform for users to deposit, borrow, and leverage assets. Its robust infrastructure makes it a preferred choice for whales executing leveraged long or short strategies.
In July 2023, Aave launched its native over-collateralized stablecoin, GHO, minted using assets from the Aave V3 pool. GHO maintains its $1 peg through arbitrage mechanics:
- When GHO trades above $1: Users mint GHO at $1 collateral value and sell it on the open market for profit, increasing supply and pushing price down.
- When GHO trades below $1: Users buy discounted GHO and repay $1 debt, reducing supply and lifting price.
Currently, GHO has a market cap of $102 million, comparable to Curve’s crvUSD.
Holders of stkAAVE (staked AAVE) enjoy key benefits:
- Discounted borrowing rates: Up to 5.08% rate on GHO loans vs. standard 7.25%.
- Merit rewards program: Earning up to 3.58% APY in additional incentives.
Despite strong protocol performance, $AAVE’s token price has underperformed ETH over the past year, largely because the token’s utility is governance-focused rather than directly revenue-sharing.
Recent Updates: A New Economic Model
On July 25, Aave’s governance entity ACI proposed a transformative economic overhaul aimed at aligning protocol success with token value.
1. Umbrella Atokens Security Module
Previously, safety modules relied on selling staked assets during shortfall events. The new model introduces Umbrella Atokens—a dedicated class of tokens that absorb losses via burning, not liquidation. This increases system efficiency and reduces market impact during crises.
To boost borrower participation (currently only ~20% of users borrow), the module offers mid-term incentives paid in respective aTokens, funded by reserve factors of underlying assets.
2. Aave Protocol-Owned Liquidity & Buyback Mechanism
- Revenue flow: Interest from Aave V3 loans flows into the Aave Collector.
Distribution:
- Part funds AAVE buybacks, allocating tokens to ecosystem reserves.
- Part distributed as Atokens to stkAAVE holders.
- Security layer: In shortfall scenarios, stkAAVE and stkGHO are seized and burned to cover debt.
- Anti-GHO mechanism: Provides extra buffer by minting stkGHO to backers who help secure the system.
- Reward distribution: Stakers earn yields from protocol income based on contribution.
This model tightly couples protocol revenue with token value, creating a sustainable flywheel.
Future Implications
The most significant outcome is the direct link between lending activity and $AAVE price appreciation. Every loan generates income that can be used to buy back AAVE tokens—a structural catalyst for long-term valuation growth.
Additionally, improved staking incentives enhance protocol security and encourage deeper user engagement. While the proposal is still in early stages and requires refinement, its approval could attract more capital into Aave, driving higher yields and reinforcing confidence in the ecosystem.
MakerDAO: Redefining Decentralized Stablecoins for Scale
Current Status
Founded in 2014 and launching its first whitepaper in December 2017, MakerDAO introduced Dai, the first decentralized stablecoin. Initially backed solely by ETH (Single-Collateral Dai or SCD), it evolved into Multi-Collateral Dai (MCD) in November 2019, enabling diverse collateral types.
Today, Dai remains the largest decentralized stablecoin, distinguished by its integration of real-world assets (RWA) like U.S. Treasury yields—a move that positions MakerDAO at the forefront of institutional-grade DeFi adoption.
Internally, MakerDAO launched two key platforms:
- Spark Protocol: A subDAO allowing users to borrow DAI using ETH, stETH, or sDAI.
- Summer.fi: A yield-aggregation platform that optimizes leveraged positions for maximum returns.
Externally, MakerDAO has invested in Web3 infrastructure projects like Multis (on-chain corporate solutions) and Opolis (DAO employment networks), expanding its ecosystem footprint.
As a governance token, MKR governs critical parameters such as:
- Risk thresholds
- Collateral types
- Stability fees
When users repay debt to redeem collateral, they must pay a fee in MKR. These fees are used to buy back and burn MKR, reducing supply and enhancing scarcity—a deflationary mechanism that supports price stability.
Unlike many DeFi tokens, MKR has kept pace with ETH over the past year, benefiting from RWA adoption trends and growing institutional interest in regulated digital assets.
👉 Explore how next-gen stablecoins are bridging traditional finance with blockchain innovation.
Recent Updates: The Endgame Plan Unfolds
1. Dual Stablecoin Strategy: NewStable & PureDai
On May 16, founder Rune Christensen announced a bold upgrade: splitting Dai into two distinct stablecoins to balance scalability with decentralization.
NewStable – Regulated & Scalable
- Designed for mass adoption and regulatory compliance.
- Will inherit Dai’s RWA and TradFi integrations.
- Governed transparently but built for practicality.
- Includes upgradeable smart contracts, allowing future governance-enabled features like freeze functions—critical for institutional adoption.
- Over time, DAI Savings Rate (DSR) will phase out; yield will shift exclusively to NewStable.
PureDai – Fully Decentralized
- Backed only by non-custodial assets like ETH and stETH—no USDC or centralized assets.
- Features a free-floating peg (not strictly $1) and uses maximally decentralized oracles.
- Deployed as an immutable contract: Once live, it cannot be altered—even by MakerDAO.
- Completely independent post-launch; no ties to Maker governance.
- Expected launch: several years away due to complexity and security requirements.
Both tokens will be interconvertible with existing Dai, ensuring smooth migration.
2. NewGovToken & SPK Rewards
Announced July 17, MKR holders can convert their tokens into NewGovToken at a 1:24,000 ratio. Upon activation:
- Users receive 15% of all SPK rewards from Spark Protocol.
- No lock-up period; activation can be canceled anytime.
This incentivizes early participation in Spark while decentralizing governance power.
3. $1 Billion RWA Expansion
On July 13, MakerDAO revealed plans to allocate $1 billion into tokenized U.S. Treasury products, partnering with leaders like BlackRock’s BUIDL, Superstate, and Ondo Finance. This marks a strategic pivot toward off-chain collateral-backed stability—a move that strengthens Dai’s resilience amid volatility.
Strategic Outlook: Why These Projects Still Matter
Both Aave and MakerDAO are positioning themselves for long-term relevance in a maturing crypto economy:
- Aave is closing the gap between protocol performance and token value through buybacks and staking rewards—potentially unlocking new investor appeal.
- MakerDAO is pioneering a dual-path strategy: one foot in regulated finance (NewStable), one in pure decentralization (PureDai)—a balanced approach few can replicate.
With Ethereum ETF approvals opening doors to traditional capital, DeFi’s integration with real-world finance is accelerating. RWA adoption is no longer speculative—it's operational.
👉 See how institutional capital is flowing into DeFi through regulated asset tokenization.
Frequently Asked Questions (FAQ)
Q: What is Aave’s Umbrella Atokens security module?
A: It’s a new risk mitigation system where staked Atokens are burned during shortfall events instead of being sold off, improving capital efficiency and reducing market impact.
Q: How does GHO maintain its $1 peg?
A: Through arbitrage—users profit by minting or redeeming GHO when price deviates from $1, naturally correcting supply and demand imbalances.
Q: What is the difference between NewStable and PureDai?
A: NewStable focuses on regulatory compliance and scalability using RWAs; PureDai prioritizes full decentralization with immutable contracts and non-custodial collateral.
Q: Will MKR be replaced by NewGovToken?
A: No. MKR remains the core governance token. NewGovToken is a transitional instrument to bootstrap Spark Protocol’s governance.
Q: Can I earn yield from holding AAVE or MKR directly?
A: Not directly. However, staking AAVE into stkAAVE or participating in Merit rewards allows yield generation. MKR earns value through buybacks and burns when stability fees are paid.
Q: Are these protocols safe during market crashes?
A: Both have strong risk frameworks—Aave’s isolation mode and Maker’s multi-collateral buffers enhance resilience. However, extreme black-swan events always pose risks in DeFi.
Core Keywords:
Aave, MakerDAO, DeFi lending, GHO stablecoin, NewStable, PureDai, real-world assets (RWA), DeFi TVL