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TVL $892MAPY 2.85%low riskUpdated Feb 1, 2025

Aave Ethereum DAI

Supply DAI to Aave V3 on Ethereum to earn variable interest. DAI is a decentralized stablecoin backed by crypto collateral in the Sky (MakerDAO) ecosystem.

ProtocolAave V3
Networkethereum
SymbolAETHDAI
CategoryMoney Markets
Underlying Assets
DAI
Contract Address0x018008bfb33d285247a21d44e50697654f754e63

What is Aave Ethereum DAI?

Aave Ethereum DAI is a lending market for the DAI stablecoin on Aave V3. DAI is a decentralized, overcollateralized stablecoin created by the Sky (formerly MakerDAO) protocol. Unlike centralized stablecoins like USDC or USDT, DAI maintains its peg through smart contract-enforced collateralization rather than fiat reserves.

How This Market Works

Supplying DAI to Aave follows the standard lending model:

  1. Deposit DAI into the Aave V3 lending pool on Ethereum
  2. Receive aETHDAI tokens representing your deposit plus accrued interest
  3. Interest compounds automatically from borrower payments
  4. Withdraw DAI plus earned yield at any time, subject to liquidity
Interest Rate Dynamics: DAI markets typically have moderate utilization. Rates fluctuate based on overall DeFi activity and competition from the Sky Savings Rate (formerly DAI Savings Rate), which offers an alternative yield source for DAI holders.

What Assets Are Involved

Supply Asset: DAI (Dai Stablecoin) - decentralized USD-pegged stablecoin Receipt Token: aETHDAI - interest-bearing Aave deposit token

DAI borrowing is commonly used for:

  • Leverage without centralized stablecoin exposure
  • Yield farming and DeFi strategies
  • Treasury management by DAOs preferring decentralized assets
  • Arbitrage between DAI and other stablecoins

DAI vs Centralized Stablecoins

DAI offers unique characteristics:

  • Decentralized Issuance: No single entity controls minting
  • Transparent Collateral: All backing is visible on-chain
  • Crypto-Native: Backed by ETH, WBTC, and other crypto assets
  • Governance: Sky DAO controls parameters through token voting

Trade-offs include potential depegging during extreme market volatility and dependency on the Sky protocol's governance and risk management.

Risk Disclosures

Smart Contract Risk: Exposure to both Aave V3 and the underlying DAI/Sky smart contracts. Both are battle-tested but carry residual risk. Stablecoin Mechanism Risk: DAI's peg depends on the Sky protocol's liquidation mechanisms and collateral management. Black swan events could stress the peg. Oracle Risk: Accurate collateral pricing is essential for both Aave liquidations and DAI's stability mechanisms. Utilization Risk: High borrowing demand during market stress could temporarily limit withdrawals. Sky Savings Rate Competition: When the Sky Savings Rate offers higher yields, DAI may flow out of Aave markets, affecting supply liquidity. Governance Risk: Both Aave and Sky are governed by token holders whose decisions affect protocol parameters.

Related Money Markets

Aave Ethereum WETH1.25% APYAave Ethereum USDT2.45% APYAave Ethereum wstETH0.01% APYAave Ethereum USDC3.47% APYAave Ethereum WBTC0.01% APY
Disclaimer: APY and TVL figures are based on on-chain data and may fluctuate. Past performance does not guarantee future results. DeFi investments carry smart contract, market, and liquidity risks. This content is for informational purposes only and does not constitute financial advice. Always conduct your own research before investing.

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