Aave vs Compound: Key Differences in DeFi Lending Protocols

When you lend crypto on DeFi, you’re not just earning interest—you’re choosing a system. Aave, a decentralized lending protocol that lets users borrow and lend over 30 assets with flexible interest rates and flash loans. Also known as Aave V3, it’s built for users who want control, customization, and advanced features like collateral swaps. Compound, one of the earliest DeFi lending markets, uses fixed algorithmic rates and a simpler structure focused on stability and broad asset support. Also known as Compound Finance, it’s the go-to for traders who prefer predictability and a clean interface. Both run on Ethereum, both let you earn yield on idle crypto, but they’re built for different kinds of users.

Here’s the real difference: Aave gives you options. Want to borrow using one asset as collateral and swap it mid-loan for another? Aave lets you. Need a flash loan to execute an arbitrage trade in seconds? Aave has it. Want to earn interest on stablecoins like DAI or USDC while keeping your ETH locked as collateral? Aave’s flexible collateral system handles it. Compound keeps it tight. Rates adjust automatically based on supply and demand, but you can’t swap collateral or use flash loans. It’s like a savings account with a fixed interest rate—no frills, no surprises. That simplicity made Compound the first big name in DeFi lending, but Aave caught up fast by adding tools serious users actually need.

Staking CRV or COMP tokens? That’s a whole other layer. Compound rewards you with COMP tokens for lending or borrowing, which you can then stake or sell. Aave gives you AAVE tokens, but they’re more about governance than direct yield. If you care about earning extra tokens just for using the platform, Compound has the edge. If you care about flexibility, safety, and advanced features like interest rate switching or collateral management, Aave wins. Neither is better overall—just better for your goals. Below, you’ll find real breakdowns of how these platforms behave in practice, what users are actually earning, and which one you should pick based on your strategy—not hype.