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Aave
Aave review: DeFi lending with WBTC collateral. Live APR and risk parameters can change by market and governance vote.
Run your numbers
What happens if BTC drops.
The single most important question on a Bitcoin loan. With Aave, liquidation is algorithmic. Once your loan-to-value crosses the liquidation threshold below, the protocol can repay your debt and seize collateral without manual review.
At Aave's 70% opening LTV, BTC would have to fall 9% before a position opened at that LTV reaches the 77% liquidation threshold.
Cure window: None — algorithmic.
What Aave publishes: Algorithmic liquidation at 78% LTV with 5% penalty. No grace period — liquidation is instant and executed by liquidation bots.
The terms, translated.
With Aave, the “contract” is the smart-contract risk parameters and the loan terms. We've pulled the key terms from Aave's own data and translated them into plain English.
How Aave compares to its closest cousins.
The org, the founder, the governance.
Aave V3 terms are live protocol parameters, not fixed lender terms. Governance reduced WBTC max LTV to 70% (ARFC, Nov 2024); liquidation threshold ~77% (lowered in the Sept 2024 BitGo-transition ARFC) and 5% penalty on Ethereum, but newer WBTC-risk discussions can change parameters. Borrow APR changes in real time with utilization. Users must verify the exact market, chain, asset, APR, LTV, liquidation threshold, and bonus inside the Aave app before acting.
The 8-factor breakdown.
Non-Custodial. Scores 9/10 (strong) on the custody axis. Non-custodial designs score highest because no third party can move collateral; custodial designs lose points proportional to operator discretion.
Policy: none. Scores 10/10 (strong). "Strict" / "no-rehypothecation" policies score highest because collateral cannot be lent out; "permitted" policies lose points for exposure to counterparty failure on the re-pledged BTC.
Scores 10/10 (strong). Programmatic on-chain liquidation at a fixed LTV scores highest (predictable, no operator discretion); discretionary or off-chain liquidation processes lose points proportional to opacity and timing risk.
Regulatory status: offshore. Scores 4/10 (weak). US/EU-regulated lenders with explicit licensing score highest; offshore or DAO-governed entities lose points because there's less recourse if something goes wrong.
Reserves reporting via On-chain (smart contract). Scores 9/10 (strong). Recurring third-party attestation scores highest; self-attested or unpublished reserves lose points.
Scores 10/10 (strong). Lenders that publish operating reports, smart-contract code, and live rate/LTV parameters score highest; those that bury terms in PDFs or change rates without notification lose points.
6+ years operating since 2020. Scores 9/10 (strong). Older operations with surviving stress events (March 2020, Nov 2022, etc.) score highest; younger or untested operations lose points proportional to how many full cycles they've operated through.
Scores 5/10 (moderate). Loan agreements with explicit liquidation order, documented smart-contract risk, and clear borrower recourse score highest; ambiguous default terms lose points.
Same score, different shape.
Each spoke is one of the eight factors behind Aave's 8.3/10, plotted 0–10 and ordered by methodology weight. The filled shape is the lender's safety profile. Two lenders can share an overall score and still have opposite shapes — a balanced octagon is a very different risk than a spike on one axis with thin edges everywhere else. Aave is strongest on rehypothecation (10/10) and thinnest on regulatory (4/10).
Questions readers actually ask about Aave.
Is Aave safe for Bitcoin-backed loans?
Aave has a safety score of 8.3/10. It's one of the largest DeFi lending protocols we track by TVL, at $23B+, with 6 major security audits (OpenZeppelin, Trail of Bits, Certora, SigmaPrime, ABDK, Peckshield), and has operated since 2020 without a hack on its lending markets. Collateral is held in non-custodial smart contracts. However, it uses WBTC (not native BTC) and carries smart contract risk.
What are Aave's Bitcoin loan rates?
Aave offers variable-rate borrowing against WBTC. Rates fluctuate based on pool utilization but typically range 1.5–3.0% APR. At low utilization rates can be under 1%, but during high demand they can spike above 10%. There are no origination fees.
How does Aave liquidation work?
Aave uses algorithmic liquidation at 78% LTV with a 5% penalty. There is no grace period — liquidation bots automatically repay debt and seize collateral when the threshold is breached. The 70% max LTV (governance cut from 73% in Nov 2024) provides an 8% buffer.
What is WBTC and what are the risks?
WBTC (Wrapped Bitcoin) is an ERC-20 token backed 1:1 by BTC held by BitGo. Using WBTC means you trust BitGo as a custodian. This adds centralized custodial risk to an otherwise decentralized protocol. Aave does not accept native BTC.
Does Aave require KYC?
No. Aave is a permissionless DeFi protocol. Anyone with an Ethereum wallet can deposit WBTC and borrow without identity verification. This is a key difference from CeFi platforms like Ledn or Unchained.
The receipts.
Every figure on Aave traces to a primary document. These are the ones we read — open any of them.
WBTC LTV, liquidation threshold, and liquidation penalty parameters used as the structured risk baseline
More recent WBTC risk-parameter discussion; users must verify live app parameters before borrowing