Delphi Digital Identifies $52M Annual Deadweight Loss in Aave's Top Three Markets

According to Delphi Digital, in its latest report, WETH, USDT, and USDC represent Aave's three largest lending markets on Ethereum, accounting for 89% of total borrows. These markets show a 25%-35% gap between lending rates and borrowing rates, resulting in approximately $52 million in annual deadweight loss—nearly half of Aave's annualized Q1 revenue. Even if reserve factors are fully eliminated, approximately $36 million in losses would remain.

The analysis was prompted by the April 18 KelpDAO bridge attack, which exposed the peer-to-pool model's structural weakness. Attackers leveraged $292 million in rsETH for margin borrowing on Aave, triggering approximately $200 million in bad debt and causing 100% utilization freezes in primary markets like WETH for five days.