Bank staff conducted a study based on data from January 2023 to May 2025. Aave requires borrowers to provide more collateral than the amount they borrow. If the value of the collateral falls to a certain level relative to the borrowed asset, liquidation occurs. The liquidation fees range from 5% to 10% of the liquidated value. The Bank of Canada noted that this model protects lenders from unrecovered losses. However, it also shifts the risks to borrowers and limits capital efficiency compared to traditional lending systems. Additionally, 8.2% of lending operations on Aave involve looping, which significantly increases risks. This scheme involves repeatedly re-using borrowed assets as new collateral. This is only profitable if deposit rates exceed lending rates. According to DefiLlama, Aave is the largest DeFi protocol with a TVL of $24.7 billion.