DeFi Lending Rate Comparison: Aave, Compound, and More

DeFi Lending Rates by Protocol

DeFi lending protocols let users earn yield by supplying assets to liquidity pools and borrow against deposited collateral at variable rates. As of mid-2026, the top five lending protocols by TVL are Aave V3, Spark (the lending arm of Sky, formerly MakerDAO), Morpho Blue, Compound V3, and Venus. Together they hold over $30 billion in deposits and account for roughly 78% of all DeFi lending activity.

Rates fluctuate every Ethereum block (approximately every 12 seconds) based on supply and demand. The figures below represent representative snapshots on Ethereum mainnet. Use these as a baseline for comparison, not as guaranteed returns.

Supply APY Comparison by Asset

Supply APY is what lenders earn by depositing assets into a protocol's liquidity pool. Rates vary based on utilization: the more borrowing demand for an asset, the higher the yield for suppliers. Stablecoins consistently offer higher supply rates than volatile assets because borrowing demand for stablecoins is structurally higher.

Morpho vault yields appear higher because they represent curated strategies that allocate capital across multiple isolated markets, accepting different risk profiles. Some Morpho vaults include third-party reward tokens (such as Ethena's USDe campaigns) that inflate headline APY figures beyond base lending returns.

Spark's rates for USDS deposits are determined by governance through the Sky Savings Rate (SSR), currently set at 3.75%. This rate was reduced from 6.5% in early 2025 as the Sky protocol adjusted its monetary policy. For a broader look at how lending protocols generate yield, see our BtcFi landscape overview.

Borrowing APR Comparison by Asset

Borrowing rates are what users pay to take out loans against their deposited collateral. Like supply rates, these are variable and driven by utilization. Stablecoin borrowing is the dominant use case: stablecoin debt represents approximately 84% of all DeFi borrowing.

Spark offers a notably low WETH borrow rate (1.81%) because it deliberately tracks the stETH staking yield using a formula: two-day average staking yield minus 10 basis points. With approximately $725 million in WETH borrowed at this rate, Spark has become the most cost-effective venue for leveraged ETH staking strategies.

How DeFi Lending Rates Are Determined

Most lending protocols use utilization-based interest rate models with a characteristic "kink" in the curve. The utilization ratio measures how much of the supplied liquidity is currently borrowed:

Utilization = Total Borrowed / Total Supplied

The kink point (called U_optimal in Aave) is typically set at 80-93% depending on the asset. Below the kink, rates increase gradually along a gentle slope. Above the kink, rates spike sharply to discourage further borrowing and incentivize new deposits. This two-slope design keeps utilization near its target range.

Aave V3: Two-Slope Kinked Model

Aave V3 recalculates rates every Ethereum block. For USDC on Ethereum, the optimal utilization is set at 90.5%. Below this kink, borrowing rates follow Slope1 (roughly 4% annualized). Above it, Slope2 kicks in at 75%, causing rates to surge rapidly. A reserve factor (typically 10-20%) directs a portion of interest to the Aave DAO treasury.

Compound V3: Piecewise Linear Model

Compound V3's model is similar but uses separate supply and borrow rate curves. The optimal utilization for USDC on Ethereum is 93%. Below the kink: Rate = base + SlopeLow * utilization. Above the kink: the SlopeHigh component activates, with a reserve factor of 15-25% retained by the protocol.

Morpho Blue: Adaptive IRM

Morpho Blue uses an adaptive interest rate model that adjusts its curve parameters without governance intervention. Each isolated market has its own IRM instance. Morpho can also directly match lenders and borrowers peer-to-peer at a midpoint rate: lenders earn more than pool deposits, and borrowers pay less. When no P2P match is available, transactions fall back to pool rates.

Spark: Governance-Set Rates

Spark is unique among major lending protocols. Its rates do not vary by utilization or loan size. Instead, Sky governance sets rates directly. The WETH borrow rate tracks the stETH staking yield minus a fixed spread, while stablecoin rates track the Sky Savings Rate. This makes Spark rates more predictable but less responsive to real-time market conditions.

Variable vs. Fixed Rates in DeFi

All major DeFi lending protocols now operate on variable rates exclusively. Aave V2 previously offered a "stable rate" option, but this was fully deprecated in 2024. The deprecation timeline: BGD Labs proposed removal in January 2024, governance approved in February, and all existing stable positions were permissionlessly migrated to variable rates via AIP-86 in April 2024. Compound, Morpho, and Spark never offered stable rate borrowing.

For users who need fixed-rate exposure, separate protocols exist: Pendle Finance splits yield-bearing tokens into principal and yield components, letting buyers lock in a fixed rate. Term Finance uses peer-to-peer order matching for fixed-duration loans. These are complementary products, not direct alternatives to the pooled lending model.

Impact of Incentive Tokens on Effective Rates

Token incentives can significantly change the effective rate a user earns or pays. However, the incentive landscape has shifted dramatically since 2024, with most protocols reducing or eliminating emissions-based rewards:

• Compound eliminated all COMP supply and borrow incentives in March 2026. Returns now depend entirely on organic borrower demand.
• Aave shifted from inflationary COMP-style emissions to a revenue-funded model. The DAO runs a $50M/year buyback program and distributes rewards through its Safety Module and anti-GHO mechanism for stkAAVE holders.
• Morpho actively distributes MORPHO tokens through vault-level and market-level campaigns via Merkl. Some MetaMorpho vaults show significantly higher APYs due to these incentive layers.
• Spark launched the SPK token, while the broader Sky ecosystem rewards USDS holders through the 3.75% Sky Savings Rate on sUSDS deposits.

When comparing rates across protocols, always check whether the advertised APY includes token rewards. Headline figures that bundle base yield with incentive emissions can be misleading, especially if the reward token is volatile or illiquid.

Evaluating Protocol Risk vs. Yield

Higher yields in DeFi lending typically correlate with higher risk. When evaluating a lending protocol, consider these dimensions:

Smart contract risk:

• Aave V3 has been audited by OpenZeppelin, Trail of Bits, SigmaPrime, Certora, and ABDK, with 10+ formal reviews since launch
• Compound V3 has audits from OpenZeppelin, ChainSecurity, Trail of Bits, and Certora, with no major exploit on V3 across 6+ years of operation
• Morpho Blue has audits from Spearbit, Cantina, ChainSecurity, OpenZeppelin, Certora, and Runtime Verification
• Venus has experienced $112M+ in cumulative losses across 5+ incidents since 2021, including a $2.15M donation attack in March 2026

Liquidation parameters:

• Aave V3 sets liquidation thresholds between 65-80%+ depending on asset volatility, with liquidation penalties of 5-15%
• Morpho Blue allows each isolated market to define its own LLTV (liquidation LTV), with typical values of 86% and 91.5% for correlated pairs
• Higher LTV limits allow more capital efficiency but leave less buffer before liquidation during price drops

Oracle and governance risk:

• Most protocols rely on Chainlink or Chronicle price feeds; oracle manipulation or delayed updates can trigger unjust liquidations
• Governance attacks are possible if a small number of token holders control enough voting power to alter protocol parameters maliciously
• Morpho Blue's isolated market design contains risk per-market, preventing cascading failures across the protocol

For a detailed breakdown of DeFi protocol risk factors, see our crypto lending platform comparison.

Aave V4: What Has Changed

Aave V4 launched on Ethereum mainnet on March 30, 2026, introducing a "hub-and-spoke" architecture with three hubs (Core, Plus, Prime) and eleven spokes. It expanded to Avalanche on July 15, 2026, as its first deployment beyond Ethereum, with up to $15M in launch incentives. V4 is designed to support real-world credit markets and institutional lending, though V3 still holds the bulk of Aave's TVL.

MakerDAO to Sky: What Borrowers Need to Know

MakerDAO officially rebranded to Sky in August 2024, launching USDS as the successor to DAI. The two tokens remain convertible 1:1 through the Sky converter contract. As of April 2026, Binance auto-converted all DAI balances to USDS, and exchanges like OKX and Coinbase have followed with migration support. The combined USDS and DAI supply stands at approximately $13.4 billion, making Sky the third-largest stablecoin issuer behind Tether and Circle.

Spark Protocol operates as Sky's dedicated lending arm. Built as a fork of Aave V3, it holds approximately $5.29 billion in supplied assets. SparkLend is one of the primary revenue sources funding the Sky Savings Rate, alongside real-world asset collateral returns and stability fees from CDP-minted USDS. The Spark Liquidity Layer further deploys USDS into on-chain lending pools to generate yield.

Collateral Composition Across DeFi Lending

Understanding what collateral backs DeFi loans helps gauge systemic risk. Across the top ten lending protocols, collateral composition breaks down as follows: ETH and WETH represent 39% of all deposited collateral, liquid staking tokens (wstETH, rETH, cbETH) account for 28%, and wrapped BTC variants make up 14%. Stablecoin debt accounts for 84% of all borrowing, confirming that the primary DeFi lending use case remains borrowing dollars against crypto collateral.

Frequently Asked Questions

What DeFi protocol has the highest lending rates?

Morpho Blue vaults consistently offer the highest headline supply rates, with some curated USDC vaults yielding 5-8% and incentive-boosted vaults reaching 18%+. However, these higher rates come with additional risk: curator selection risk, isolated market exposure, and reliance on potentially volatile reward tokens. For base rates without incentive layers, Aave V3 and Compound V3 offer similar yields on stablecoins (2.5-4%) on Ethereum mainnet.

Are DeFi lending rates better than traditional savings accounts?

DeFi stablecoin supply rates (2.5-8% on USDC and USDT) generally exceed traditional savings account rates in many regions. However, direct comparison is misleading. DeFi yields carry smart contract risk, oracle risk, and have no deposit insurance. Traditional bank deposits in the US are FDIC-insured up to $250,000. The risk-adjusted return depends entirely on your assessment of protocol safety.

Why do DeFi borrowing rates change so frequently?

DeFi lending rates are recalculated algorithmically based on pool utilization, which changes with every deposit, withdrawal, borrow, and repayment. On Ethereum, this means rates can shift every 12 seconds (each new block). During periods of high demand, such as market volatility or airdrop farming seasons, borrow rates can spike above 20% temporarily before settling as arbitrageurs respond.

What happened to Aave stable rate borrowing?

Aave fully deprecated stable rate borrowing in 2024. The Aave DAO approved AIP-86, which upgraded Aave V2 to enable permissionless migration of all remaining stable-rate positions to variable rates. All stable positions were converted in May 2024 with no penalty to users. No major lending protocol currently offers fixed-rate borrowing. Protocols like Pendle Finance provide fixed-rate exposure through separate yield-tokenization mechanisms.

How does Morpho differ from Aave and Compound?

Morpho Blue is a permissionless lending primitive where anyone can create an isolated market by specifying five parameters: loan asset, collateral asset, oracle, liquidation LTV, and interest rate model. Unlike Aave and Compound, which pool all assets into shared liquidity pools with governance-approved parameters, Morpho isolates risk per-market. MetaMorpho vaults, managed by curators like Gauntlet and Steakhouse Financial, aggregate across multiple Morpho markets to optimize yield. Morpho charges no protocol-level fee: curators take 5-15% of generated yield instead.

Is it safe to lend on Venus Protocol?

Venus Protocol has the weakest security track record among major lending protocols. It has suffered $112M+ in cumulative losses since 2021, including a $95M XVS price manipulation exploit, a $700K+ zkSync donation attack in February 2025, and a $2.15M THE token donation attack in March 2026. The March 2026 vulnerability had been flagged during a Code4rena audit but was dismissed as an "intentional feature." Users should weigh these incidents against any yield premium Venus offers.

What is the best protocol for borrowing ETH?

Spark currently offers the lowest WETH borrow rate at approximately 1.81%, deliberately set below the stETH staking yield (~1.91%) to enable profitable leveraged staking. Aave V3 follows at around 2.0%, with Compound V3 in a similar range. For users pursuing ETH staking leverage strategies, the spread between the borrow rate and staking yield determines profitability. Check current rates before executing, as the spread can narrow or invert during periods of high borrowing demand.

This tool is for informational purposes only and does not constitute financial advice. DeFi lending rates are variable and change every Ethereum block. Data is approximate and based on publicly available information as of mid-July 2026. Protocol TVL, rates, and risk profiles change frequently. Always verify current rates directly on each protocol's interface before making lending or borrowing decisions. DeFi lending carries smart contract risk, liquidation risk, and oracle risk with no deposit insurance.