What is AAVE?

Aave is a decentralized cryptocurrency platform that allows users to borrow and lend crypto. Aave uses smart contracts to automate the process, with preset rules on how funds are distributed, how collateral is handled, and how fees are assessed. Aave specializes in overcollateralized loans, meaning that users will need to deposit crypto worth more than the amount that they wish to borrow. This protects lenders from losing money due to loan defaults and allows the Aave protocol to liquidate the collateral if it drops too much in value. Aave also offers a native crypto token (AAVE) that can be traded on most exchanges or staked in the Aave platform to earn interest. Staking is how crypto miners earn rewards for validating transactions on a proof-of-stake blockchain like the one that underlies Aave.1

What are Flashloans?

Aave offers Flash Loans, which are loans that are borrowed and repaid within the same block. These loans are designed to take advantage of arbitrage opportunities in the crypto market, such as a price difference between cryptocurrencies on different crypto exchanges. Flash Loans are designed for developers that write smart contracts to request a Flash Loan, make an exchange, and then repay the loan within the same transaction. There is a 0.09% fee for all Aave Flash Loan transactions, paid by the borrower.

Introduction:

In this dashboard I am going to be diving into flashloans on AAVE. First I am going to look into some basic metrics like volume and number of flashloan users, as well as a handful of others, in order to get an understanding of how flashloans have developed over time and how they are doing today. Then I am going to get into the main part of this dashboard where I look into how these flashloans are used. I am first going to look at the contracts that these users interact with and in what volume to get a sense of how these flashloans are being used. Then I am going to look into liquidation. It is known that users will take flashloans in order to liquidate borrowers, so I am going to look into several different metrics that dive into the volume and amount of users that are doing this. Overall this dashboard will help highlight the relevance of flashloans now and over time as well as how they have been and currently are being used.

Base Metrics:

Flashloan Volume and Fees:

If we first draw our attention to the metrics at the top of this page we can see that flashloans have become very popular on AAVE with over 13.84B in total flashloans borrowed which accounts for over 12.46M collected by AAVE in fees. Not only is the volume overall large but it seems that when users take flashloans they tend to take pretty large loans with the average flashloan being 231K USD. Although you may think that this average is just a result of a few massive flashloans which may be partially true it appears that the average has always been pretty high, as you can see if you look at the graph in the top right corner that shows overtime the average size of flashloans has always been pretty significant. If we take out attention to the graph in the top left corner we can see that the majority of flashloans were taken during 2021, with less and less being taken overtime besides the occasional spike which can be seen on a few different occasions throughout. Overall though there still is a pretty large amount taken out everyday with anywhere from 1M-70M, which highlights that users are likely using these flashloans at very specific times to make profit.

Tokens Borrowed in Flashloans:

If we first draw our attention to the graph in the top left corner we can see that the majority of users borrow one of 5 tokens, which are USDC, USDT, DAI, WETH, and WBTC. These 5 tokens make up over 97% of all the tokens borrowed in flashloans. It is interesting to note that the tokens taken are three stablecoins and WBTC and WETH it is likely users take these tokens because they are some of the most stable tokens and thus are unlikely to suddenly drop in value after a users takes the loan. In the graph in the bottom left I show the top 5 coins, and the percentage of the volume borrowed they take up everyday. as you can see it appears that USDC became much more popular overtime along with ETH, while DAI seems to have lost popularity over time being borrowed less and less as we get closer to the current date. In the final graph in this section I show the price of these coins in order to see if the changes in price had any effect on the percentage in which users borrowed them. It seems that since these coins are overall stable it had little effect on users wants to borrow them although it is possible it had a slight effect.

Contracts:

Contracts:

If we look at the graph in the top left corner we can see that by flashloan volume FlashRollover, DAO, and CompoundMonitor are the three most popular contracts for users to use, they also make up 80% of the total volume amongst contracts used by users who take flashloans. If we move onto the graph directly above to the right we can see that in terms of the amount of times flashloan users use these contracts FlashliquidationAdapter and CompoundMonitor are by far the most popular. It is interesting to note that although FlashliquidationAdapter only makes up 4.84% of the total volume from flashloans it makes up 52.4% of contracts interacted with after taking a flashloan. It is also interesting that one of the most popular contracts for users to use involves liquidation, which we will get into more in the next section. Finally if we look at the graph directly to the right we can see that flashloans tends to be taken in large volumes at very specific times as there are only a handful of weeks in which users take flashloans and when they do it is often in very large volume with some week reaching nearly 6M in volume.

Liquidations:

Liquidations:

If we look at the first metric at the top of the page we can see liquidation actions that users take after taking a flashloan. It appears that there are a handful of different actions with different names that users take that all in some way or another involve using a flashloan to liquidate borrowers. If we move onto the row below we can see a handful of metrics related to these liquidations. A total of 35.3M has been liquidated from flashloans at an average of 15.73K liquidated per flashloan. Furthermore it appears that a handful of users are taking flashloans and liquidating everyone’s positions as there are only 66 total liquidators from flashloans but a total of 998 borrowers who have been liquidated by these users which means on average each of these users liquidates roughly 15 borrowers. If we move onto the graph in the bottom left we can see that liquidations from these users taking flashloans tend to not be super frequent and when they do occur it tends to be only one user or at max 4. If we move onto the final metric we can see that the majority of users taking flashloans and liquidating borrowers occurred from April of 2021 to around late July of 2021 after that it began to slow down pretty significantly and by the current date seems to be done pretty minimally.

Conclusion:

1. Over 13.84B has been borrowed in flashloans which accounts for 12.46M in flashloan fees collected.
2. The average flashloan is 231K, which is slightly skewed by a few very large loans.
3. The majority of flashloans volume occurred during 2021, although there is still a pretty significant amount of volume that is being taken weekly.
4. over 97% of flashloans are taken in either USDC, WETH, WBTC, USDT, or DAI.
5. The three most popular contracts for users to interact with after taking a flashloan by flashloan volume are FlashRollover, DAO, and CompoundMonitor
6. The most popular contract to interact with after taking a flashloan by total times interacted with is FlashliquidationAdapter
7. One of the most popular actions taken by users after taking a flashloan is liquidating borrowers on AAVE.
8. There are 66 liquidators from flashloans and 998 borrowers who have been liquidated by those liquidators, which means each liquidator has liquidated about 15 borrowers