Introduction
The Aave Protocol is a decentralized, non-custodial liquidity protocol that enables the supplying and borrowing of different cryptoassets from liquidity pools, and earning interest on cryptoassets supplied.
The liquidity of the protocol is measured by the availability of assets for basic protocol operations such as borrowing assets backed by collateral and claiming supplied assets along with accrued yield. It is a key metric, as a lack of liquidity will block operations.
At any point in time, the liquidity of the protocol can be assessed through the utilisation ratio (i.e., the share of reserve that is currently borrowed versus the Aave supply of each asset).
Liquidity risk mitigation tools exist with the borrow interest rate model and alternative sources of aToken liquidity.
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