Aave glossary: every term explained in plain English

Aave has its own vocabulary, and the Aave app uses most of it without explaining it. This glossary gives each term a short, plain definition, grouped by topic, with a link to the guide or live page that goes deeper.

The basics

Market

A separate Aave V3 deployment with its own list of assets and settings, such as the Ethereum Core market or the Base market. Rates in one market do not affect another. See every market.

Reserve

One asset inside one market, for example USDC on Ethereum Core. Each reserve has its own pool, interest rate curve and risk settings. On this site, every reserve has its own page, like USDC on Ethereum.

Supply

Depositing an asset into a pool so others can borrow it. Suppliers earn the supply APY and can withdraw whenever enough of the pool is not lent out.

Borrow

Taking an asset out of a pool against collateral you supplied. Borrowers pay the borrow APY, and every loan on Aave must be backed by more collateral than it is worth.

Available liquidity

The part of a pool that is not lent out: what can be borrowed or withdrawn right now.

TVL (total value locked)

The value sitting in Aave's pools. Most dashboards count it as everything supplied minus everything borrowed. See Aave TVL today.

Interest rates

APR and APY

APR is the simple yearly rate. APY adds compounding, so it is slightly higher. Aave and this site show APY. See APR vs APY on Aave.

Variable rate

A rate that changes whenever anyone supplies, borrows, repays or withdraws. Aave has switched off its old stable rate option, so loans today pay a variable rate.

Utilization

The share of a pool that is borrowed: total borrowed divided by total supplied. It is the single input that sets both rates. See live utilization for every asset.

Optimal utilization (the kink)

The point on the rate curve where rates stop rising gently and start rising steeply. It is often between 80% and 94% for stablecoins. See how Aave interest rates work.

Slope 1 and slope 2

How fast the borrow rate climbs below the kink (slope 1) and above it (slope 2). Slope 2 is much steeper, to pull utilization back down quickly.

Reserve factor

The share of borrowers' interest that goes to the Aave treasury instead of to suppliers. It is one reason the supply rate is lower than the borrow rate.

Rewards

Extra tokens that some reserves pay on top of the normal rate, usually for a limited time. Rates on this site are shown before rewards.

Average rate

What a loan actually cost over a period, as opposed to the rate at one moment. Short spikes make the two differ. See why the average rate differs from the current rate and the USDC borrow rate tracker.

Borrowing and risk

Collateral

Assets you supply and allow Aave to seize if your loan becomes unsafe. Not every asset can be collateral.

LTV (loan to value)

The most you can borrow against an asset, as a share of its value. A 75% LTV means $1,000 of collateral lets you borrow up to $750.

Liquidation threshold

The share of your collateral's value at which a loan becomes unsafe and can be liquidated. It sits a little above the LTV, which leaves a buffer between the most you can borrow and the point of liquidation.

Health factor

One number for how safe a loan is: your collateral value times its liquidation threshold, divided by your debt. Above 1 is safe; at 1 or below the loan can be liquidated. See health factor explained or try the health factor calculator.

Liquidation

When a loan's health factor falls below 1, anyone can repay part of the debt and take some of the borrower's collateral at a discount. See how liquidations work and the latest liquidations.

Liquidation bonus

The discount a liquidator gets on the collateral, such as 5%. For the borrower it works as a penalty, paid on top of the debt that was repaid.

Close factor

How much of a loan one liquidation can repay. On V3 it is usually half of the debt, and all of it when the loan is small or far below a health factor of 1.

E-Mode (efficiency mode)

A setting that lets you borrow much more against closely related assets, such as ETH against staked ETH, or one stablecoin against another. See E-Mode explained.

Isolation mode

A limit on newer or riskier collateral: while you use it, you can only borrow certain stablecoins, and only up to a set total across all users.

Supply cap and borrow cap

The most of an asset that can be supplied or borrowed in a reserve. Once a cap is full, nobody can add more until someone withdraws or repays. See supply and borrow caps.

Frozen and paused

A frozen reserve takes no new supply or loans, but people can still repay and withdraw. A paused reserve stops everything, usually briefly during an incident.

Tokens

aToken

The receipt you get for supplying, such as aUSDC. Its balance grows as interest is earned. See aTokens and debt tokens.

Debt token

A token that records what you owe. Its balance grows as interest is charged, and it cannot be transferred.

GHO

Aave's own dollar stablecoin, created when someone borrows it. Its borrow rate is set by Aave governance rather than by utilization. See what is GHO and live GHO rates.

sGHO

GHO deposited in Aave's savings, which pays a savings rate set by governance. Compare it on savings rates.

Wrapped Bitcoin

Tokens such as WBTC, cbBTC and tBTC that stand for real Bitcoin, so it can be used on Ethereum and other networks. See Bitcoin on Aave.

Aave V4 terms

Hub

A shared pool of liquidity on V4 that sets each asset's base interest rate and lends to spokes.

Spoke

Where users supply and borrow on V4. Each spoke has its own collateral rules and caps, and draws liquidity from one or more hubs.

Base rate

The borrow rate a hub charges before any risk premium. V4 pages on this site show the base rate.

Risk premium

An extra charge on a V4 loan, on top of the base rate, that depends on how risky the borrower's collateral is.

Collateral factor

V4's single setting for borrowing power, used in place of V3's separate LTV and liquidation threshold.

Target health factor

On V4, a liquidation repays just enough debt to bring the loan back up to this health factor, rather than a fixed share. See Aave V4 explained and the V4 overview.