Yesterday, Virtuals Protocol announced that the VIRTUAL token is now available for trading on the Solana blockchain, with its official LP now live on Meteora and preparations underway for Virtual Protocol's Launchpad on Solana. Meanwhile, Nansen CEO Alex Svanevik tweeted about when Aave could be used on Solana, tagging Aave team members and the Solana founder.

However, the comments section of this tweet turned into a battleground between Solana supporters and Aave fans, reflecting a larger competition between the Ethereum and Solana ecosystems in specific use cases.

A "War of Words" About a Lending Protocol

Solana's Milkman Multicoin partner Kyle Samani commented under this tweet about Kamino, a DeFi lending protocol in the Solana ecosystem, aiming to suggest that Kamino is Solana's Aave.

Svanevik replied stating that Aave's scale is 10 times larger than Kamino, "If Aave users can easily switch chains, it would be a massive TVL release."

However, Solana's founder toly and Foundation Chair Lily Liu do not share this view. Lily mentioned that Kamino's product is superior and proudly said, "Today's metrics do not represent tomorrow's performance." toly expressed support for a local team focused on the Solana mainnet, stating that backing a team that is focused on one chain for long-term investment is wiser than supporting a team with scattered focus on multiple chains, bluntly extinguishing the possibility of Aave coming to Solana.

Under the sharp comments from the Solana ecosystem community, Aave and even Ethereum ecosystem supporters were not willing to back down.

Aave founder Stani directly fired back, stating that the current state of Solana DeFi is copying Aave's old technology, pasting a UI that is halfway done, and restricting UK users. Although Stani mentioned Solana DeFi, savvy individuals know he was targeting Kamino, which is also a lending protocol.

So, toly shared Aave and Kamino's DeFiLlama interface, stating that Kamino's TVL is 1/8 of Aave's, but its revenue is 1/2.5 of Aave's. "I don't understand why Aave would be a better product if it can't squeeze out revenue. TVL is just a cost."

Stani also sharply replied that Kamino's USDC reserve factor (the percentage the platform takes from each transaction or pool) is 15%, while Aave's is only 10%, meaning it charges higher fees from user pools. Stani believes this demonstrates the current lack of competitiveness in the Solana ecosystem, leading to weaker bargaining power for users when choosing a DeFi platform, resulting in higher fees passed on to users.

The main instigator of this "war of words," Alex Svanevik, then added fuel to the fire by stating that Solana has surpassed Ethereum in several key metrics, including active addresses, transaction volume, DEX trading volume, and total Gas fees. However, in terms of TVL, Solana has not yet overtaken Ethereum. Therefore, the most direct strategy is to attract Aave, the top-ranked app in TVL on Ethereum, to deploy on Solana, further enhancing its DeFi ecosystem's competitiveness.

Some in the comments section questioned the logic of this argument because deploying Aave on Solana would not magically create TVL. Svanevik explained that for Aave's deployment to not bring any growth in Solana's TVL, two conditions must be met simultaneously:

1. Aave's current TVL has no funds moved to Solana;

2. There is no new TVL entering Aave on Solana.

However, since Aave has already attracted $200 billion in TVL, Svanevik believes Aave should migrate to Solana, making it hard to determine whether Svanevik is truly an Ethereum maxi or a Solana maxi.

The Cost of Trust Above All

Undoubtedly, Aave is a core DeFi application in the Ethereum ecosystem, along with Uniswap, Lido, and others, forming the core landscape of DeFi on Ethereum. Some in the community also question why Ethereum's top DeFi applications would overlook an ecosystem like Solana, which has unlimited potential. Setting aside technical factors like code, the reasons why an application chooses not to migrate to a new ecosystem are the same as those that choose to expand their ecosystems – all for the sake of incremental growth.

The Virtuals Protocol has expanded to Solana, gaining a broader user base and liquidity foundation. Meanwhile, Aave's decision not to move to Solana likely involves considerations regarding the competitive landscape. Solana's current DeFi sector has become increasingly robust, with multiple later-stage teams competing for market share in just the lending protocol space alone, such as Kamino, marginfi, Save, and others. The cost of Aave's expansion will be higher than imagined.

More importantly, Aave's existing brand image will also face uncertainty due to the expansion. As some in the community have noted, "If a funds manager in the seven to eight figures range wishes to achieve above-chain returns while ensuring security, nine out of ten times, they would recommend them to go to Aave on Ethereum rather than DeFi on Solana, Tron, Celestia, or other chains."

Security is the foundation of a lending product. Only when there is an adequate security audit, experience in handling hack attacks, and a mature contract design will both whales and regular users choose to anchor their assets here. Therefore, Aave's ability to become one of the most influential lending platforms on Ethereum is inseparable from Ethereum's long-standing developer ecosystem, security audit cases, and huge and mature liquidity pools.

DeFi's financial nature determines that "the longer it runs, the stickier it gets." This stickiness is rooted in a deep trust in the security and stability of the product contract. This "trust cost" not only extends to considerations of speed, performance, and transaction costs on a new chain but also includes the completeness of the infrastructure, the coverage of auditing companies, the community's alertness to potential security vulnerabilities, and the ecosystem's responsiveness to prompt remedies under extreme conditions.

Related Reading: "Revisiting DeFi: The Present and Future of Web3 Business Models"

Looking back on Ethereum DeFi's development over the past few years, many projects have undergone major vulnerabilities or security incidents, even suffering losses of hundreds of millions of dollars. It is through responding to and iterating on these incidents that the security rampart of Ethereum DeFi has gradually been built. Aave's popularity stems from leveraging this security moat, making it the preferred choice for high-volume users, especially institutional players. In other words, most people see Aave as a synonym for "low risk, considerable returns," particularly for users with funds amounting to millions or even tens of millions of dollars, where security and stability always take precedence over incremental returns.

In contrast, Solana, as a high-performance Layer1 blockchain, does have certain advantages in transaction speed, gas fees, and other aspects. However, from the perspective of lending protocols, the core of financial applications lies in the "risk-reward ratio." While speed and low fees are certainly important, if a platform cannot provide proven security and a tamper-resistant record against attacks, such advantages often may not be sufficient to support the long-term migration of a large amount of liquidity in the DeFi race. Especially in lending businesses, they have to deal with multiple risk factors such as liquidation, interest rate fluctuations, smart contract audits, and hacker attacks; once issues arise, the platform's years of accumulated brand image and trust will be instantly shattered, and this "trust cost" is far more expensive than the technology itself.

Furthermore, even if Aave does choose to expand to Solana, it does not necessarily mean there will be a "magical" increase in TVL. Funds are profit-driven and rational. The two to three hundred billion US dollars TVL accumulated by Aave on the Ethereum mainnet are not willing to automatically migrate to another chain. On the contrary, due to significant differences in the underlying technology stack, programming languages, and even community culture between different chains, Aave would need to invest a considerable amount of time and resources to adapt and audit, which in itself implies very high expansion costs and management risks. Moreover, the existing native lending protocols on Solana are also becoming increasingly mature, and Aave does not have an unbeatable first-mover advantage.

Therefore, with the threefold protection of security barriers, brand, and fund scale, if Aave insists on a large-scale expansion to Solana, it may not necessarily be the most prudent choice. After all, in the long marathon race of DeFi, winning user trust and security awareness is the most unshakable core barrier.

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