In the wake of the FTX collapse and the resulting crisis of confidence in centralized exchanges, decentralized finance (DeFi) has gained unprecedented attention. Even during bear markets and prolonged consolidation phases, DeFi continues to play a pivotal role in the growth of the crypto ecosystem. DeFi encompasses a wide range of on-chain financial services, including token issuance, trading, lending, asset management, and fundraising. Among these, DeFi lending stands as a foundational pillar—enabling leveraged positions, passive income generation, and incentive-driven participation.
According to the latest data from DefiLlama as of May 21, 2024, the total value locked (TVL) in DeFi lending protocols reached $36.116 billion, accounting for 34% of the entire DeFi sector’s $105.196 billion TVL—second only to liquid staking, which holds $55.717 billion. The top three lending protocols—Aave, JustLend, and Spark—command TVLs of $12.721 billion, $6.824 billion, and $2.706 billion, respectively.
Enter Avalon Finance, a next-generation, Bitcoin-ecosystem-native lending protocol with ambitions to surpass Aave’s dominance. While its current TVL sits at $295.6 million, its growth trajectory suggests untapped potential. Below, we explore why Avalon Finance is uniquely positioned to break through Aave’s ceiling by analyzing ecosystem market potential, business direction, and innovative operational models.
Ecosystem Market Potential: Bitcoin’s Untapped Financial Layer
Avalon Finance is currently the largest lending protocol within the Bitcoin ecosystem. Bitcoin, as the world’s most valuable cryptocurrency—and one of the most recognized assets globally—boasts a massive user base and institutional adoption. In contrast, Aave operates primarily within the Ethereum ecosystem.
With Bitcoin’s market cap at approximately $1.4 trillion and Ethereum’s at around $440 billion, the theoretical lending market size for Bitcoin could be nearly three times larger than Ethereum’s. Yet, Bitcoin’s DeFi ecosystem remains underdeveloped compared to Ethereum’s mature infrastructure.
Avalon Finance is changing that narrative by bridging on-chain and off-chain liquidity into Bitcoin DeFi. It doesn’t just offer lending—it integrates decentralized trading, asset management, and tokenized real-world asset (RWA) financing, creating a holistic financial layer for Bitcoin.
👉 Discover how Bitcoin-powered DeFi is reshaping decentralized lending
This multi-functional approach gives Avalon a significant edge over Aave, which remains largely focused on lending within a single ecosystem. By anchoring itself in Bitcoin’s vast economic footprint, Avalon taps into an underserved market with exponential growth potential.
Business Direction: Multi-Chain Expansion and Competitive Yields
Beyond ecosystem advantages, the broader DeFi lending market is poised for growth through two key drivers:
- Expansion of DeFi adoption
- Overall crypto market growth
These trends benefit all players—but only those with strategic agility can capture them effectively.
Avalon Finance has already expanded beyond Bitcoin, deploying on BNB Chain, Arbitrum, and Ethereum, with plans to integrate more ecosystems. This cross-chain presence enhances liquidity aggregation and user accessibility.
Meanwhile, Aave—despite its leadership status—faces challenges in yield competitiveness. Avalon Finance aims to offer the lowest borrowing rates across all major networks, especially for Bitcoin-backed loans, making it highly attractive to borrowers and leveraged traders.
This aggressive yield strategy, combined with seamless cross-chain interoperability, positions Avalon as a scalable alternative in a fragmented DeFi landscape.
Innovative Business Model: RWA Lending and Isolated Pools
The most transformative aspect of Avalon Finance lies in its forward-looking business model—particularly its focus on Real-World Asset (RWA) lending.
The Rise of Tokenized Real-World Assets
RWA represents the convergence of traditional finance and blockchain technology. Assets like real estate, commodities, stocks, art, and precious metals can be tokenized and used as collateral in DeFi protocols.
Since 2019, major financial institutions—including JPMorgan, Goldman Sachs, DBS Bank, and UBS—have explored RWA tokenization. Bernstein Research forecasts that 2% of global money supply—around $3 trillion—will be tokenized within five years. This opens a massive capital flow opportunity for platforms like Avalon Finance.
Avalon is already building infrastructure to bring RWAs on-chain, positioning itself as a bridge between traditional finance and decentralized ecosystems.
Isolated Lending Pools: Risk Mitigation Meets Flexibility
Avalon employs an isolated pool architecture with three distinct tiers:
- Main Pool: For stable, permissionless assets resistant to price manipulation.
- Innovation Pool: Designed for high-volatility or newly listed assets.
- RWA Lending Pool: Supports both permissioned and permissionless RWA tokens.
This structure allows Avalon to:
- Minimize systemic risk
- Optimize capital efficiency
- Customize interest rates based on asset risk profiles
- Enable dynamic collateralization ratios
Such granular control enhances security while offering users tailored financial products—an advantage over Aave’s more generalized risk framework.
👉 See how isolated pools are revolutionizing DeFi risk management
Maximizing User Incentives: The Circular Lending Strategy
To accelerate adoption, Avalon Finance offers a points-based incentive program that rewards active participation—especially through circular lending.
Here’s how users can maximize their rewards:
- Register and Connect Wallet: Users link wallets like MetaMask or Trust Wallet to the Avalon platform.
- Deposit Assets: Deposit supported assets (e.g., BTC, ETH, USDT) into the Main or Innovation Pool. Every $100 deposited earns 100 points daily.
- Borrow Against Collateral: Borrowing generates additional rewards—$100 borrowed earns 150 points per day.
Leverage Multipliers: Main Pool points receive a 2x multiplier; Innovation Pool gets 1x.
- Example: Deposit $100 and borrow $50 in the Main Pool → Daily points = (100 + 50 × 1.5) × 2 = 350 points
- Repeat for Amplified Gains: Re-deposit borrowed funds into another pool (where allowed), repeating the cycle to compound point earnings.
- Redeem Rewards: Accumulated points can be exchanged for AVA tokens or other incentives post-campaign.
This circular model encourages users to increase their total deposit-borrow volume efficiently—maximizing reward yield without requiring additional capital.
Currently, Avalon runs a triple-points campaign across Merlin, Bitlayer, BNB Chain, and Arbitrum—set to end in June. In today’s PointFi-driven environment, this presents a low-cost, high-certainty opportunity for early adopters.
Growth Trajectory: From Niche Player to Market Leader?
While Bitcoin DeFi has historically lagged behind Ethereum, its momentum is building rapidly. Avalon Finance’s steady TVL growth—from modest beginnings to nearly $300 million—mirrors early-stage Aave’s trajectory.
Notably, Aave’s TVL surged from $58 million to $13.5 billion within six months of launch. Given Avalon’s broader ecosystem reach and upcoming RWA integration, capturing 10% of Aave’s current market share during this bull cycle is not unrealistic.
With continued expansion across chains and asset classes, Avalon Finance could evolve from a Bitcoin-native protocol into a universal lending layer for both digital and real-world assets.
Frequently Asked Questions (FAQ)
Q: What makes Avalon Finance different from Aave?
A: Avalon focuses on Bitcoin’s vast ecosystem and integrates RWA lending with isolated risk pools, offering greater diversification and cross-chain support compared to Aave’s Ethereum-centric model.
Q: How does circular lending work on Avalon?
A: Users deposit assets, borrow against them, then optionally re-deposit borrowed funds—repeating the cycle to maximize point rewards while maintaining healthy collateral ratios.
Q: What are isolated lending pools?
A: These are separate liquidity pools (Main, Innovation, RWA) designed to isolate risk by asset class, improving security and enabling customized interest rate models.
Q: Is RWA lending safe on blockchain platforms?
A: Avalon mitigates risk through legal frameworks, asset verification, over-collateralization, and its isolated pool system to protect lenders and maintain platform stability.
Q: Can I participate in Avalon’s points program from any country?
A: Participation depends on local regulations; users should verify compliance before engaging with any DeFi protocol.
Q: When will Avalon launch its native token?
A: While no official date has been announced, reward points accumulated during campaigns are expected to factor into future token distribution.
Final Outlook: A New Era for Decentralized Lending?
Avalon Finance combines three powerful forces:
- The unmatched market depth of Bitcoin
- The explosive growth potential of RWA tokenization
- An innovative risk-isolated, multi-pool architecture
These elements position it not just as another lending protocol—but as a potential successor to Aave’s throne.
As DeFi matures and real-world assets migrate on-chain, platforms that blend security, scalability, and cross-ecosystem reach will lead the next wave. Avalon Finance is building that future—one loan at a time.