Aave vs Compound vs Morpho: how they differ

Aave, Compound and Morpho do the same basic job: lenders earn interest, and borrowers post collateral to take loans. They differ in how assets are grouped, who sets the risk rules, how rates move and what happens when a loan goes bad. This guide compares the versions live in October 2026, without ranking them.

Aave: shared pools with many assets

On Aave V3, each market is one pool that holds many assets, such as Ethereum Core. You can supply several assets, use them together as collateral, and borrow any asset the market lists. Your collateral is an ordinary deposit, so it can earn the supply rate while it backs your loan.

Aave governance, where AAVE holders vote, chooses risk settings per asset. Appointed risk stewards can tune caps, collateral settings and rates within approved limits. E-Mode raises limits for assets that move together, such as two stablecoins. Since version 3.7 (2026), an E-Mode category can also be isolated, so that only the assets it lists count as collateral; this replaced the older isolation mode. Caps limit how much of each asset a market takes (see supply and borrow caps).

Aave V4 went live on Ethereum on 30 March 2026 and runs next to V3. Liquidity sits in shared hubs, and you borrow through spokes that each have their own rules. Borrowers pay a base rate plus a personal risk premium that depends on their collateral, as Aave V4 explained describes.

Compound III: one borrowable asset per market

Compound III, also called Comet, builds each market around a single base asset. Borrowers can post several collateral assets but can only borrow the base asset. Only base asset suppliers earn interest, and collateral earns nothing.

COMP token holders and delegates govern Compound. Through a timelock contract, they set each market's collateral factors, supply caps, price feeds, rate curves and liquidation penalties. In May 2026 governance approved funding to build a Compound V4, but Compound III is the live version described here.

Morpho: isolated markets and curated vaults

A Morpho market pairs exactly one collateral asset with one loan asset. Its creator also picks a liquidation loan-to-value (LLTV), an oracle that prices the collateral, and an interest rate model. Anyone can create one without a vote, but the LLTV and rate model must come from lists Morpho governance has approved. Once a market exists, none of these settings can change. Collateral is not lent out, so it earns nothing from the market.

Many lenders use a vault instead. A curator decides which markets it may use and how much goes into each, and an allocator moves the money. In Vault V2, the current version, changes that add risk wait out a timelock that each vault sets for itself. Curators can charge fees, and depositors share any losses from the vault's markets.

Morpho also runs Midnight, a separate product for fixed-rate, fixed-term loans priced by offers from lenders and borrowers. It launched on Base in July 2026, reached Ethereum by September 2026, and runs alongside the variable-rate markets.

How interest rates are set

• Aave V3: each asset has a kinked curve driven by utilization, the share of the pool that is borrowed. Governance chooses the curve, and the supply rate follows from the borrow rate. See how Aave interest rates work.
• Compound III: also kinked curves driven by utilization, but supply and borrow rates each follow their own curve. Governance sets both.
• Morpho: the approved model, AdaptiveCurveIRM, aims for 90% utilization. At 100% utilization the rate is four times its level at 90%. If utilization stays away from 90%, the whole curve drifts up or down, faster the further away it is. Nobody votes on these moves.

How liquidations differ

On all three, anyone can liquidate a loan that crosses its limit, but the rules differ.

• Aave V3: below a health factor of 1, a liquidator can usually repay up to half the debt, or all of it if the health factor is below 0.95 or the position is small. They get collateral plus a bonus set per asset. On V4, the bonus grows the further a loan has fallen. More in how Aave liquidations work.
• Compound III: a liquidator triggers absorb, and the protocol takes over the whole account. The borrower is left with no debt and gets the collateral's value back in the base asset, minus a penalty. The protocol pays from its reserves and later sells the collateral at a discount.
• Morpho: once a loan's LTV passes the LLTV, a liquidator can repay any amount up to the full debt. The bonus, called the liquidation incentive factor (LIF), is fixed by the LLTV and capped at 15%. If the collateral runs out first, that market's lenders share the loss.

Side by side

Which one fits which need

No design is better for everyone. Each makes a different trade-off.

• Lending: an Aave deposit is exposed to every collateral asset in its market, which caps and isolated E-Mode categories try to limit. A Compound III lender is exposed to one market's collateral list. A Morpho market lender is exposed to one collateral asset and one oracle, and a vault depositor relies on the curator.
• Borrowing several assets against a mixed basket: Aave's shared pools are built for this.
• Borrowing one asset against several collateral assets: this is Compound III's design, with collateral that earns nothing.
• Rules that can never change: a Morpho market offers this, but a weak oracle or LLTV cannot be fixed either.
• A fixed rate for a set term: Morpho offers this through Midnight on a few networks. The Aave and Compound loans here pay variable rates.

Aave Tracker covers Aave only: compare live rates on the best rates page, browse every market, or read is Aave safe? Our sister site Morpho Watch tracks Morpho markets and vaults. Official docs: Aave, Compound and Morpho.