Aave becomes the dominant DeFi venue for tokenized gold deposits

Aave V3 has established itself as the dominant lending protocol for tokenized gold, currently controlling over 50% of all such assets deposited across decentralized finance. By integrating gold-backed tokens like PAXG and XAUT, the protocol allows users to leverage physical commodity-backed assets to borrow stablecoins. The successful implementation of Aave's isolation mode has been critical, enabling the safe onboarding of these assets and ensuring stability during market stress events like the March 2026 liquidations. Despite this leadership, only 1.5% of the $4.2 billion total market capitalization for PAXG and XAUT is currently utilized as on-chain collateral. This low utilization rate highlights the nascent stage of the tokenized gold market and the significant growth potential for DeFi lending platforms. The reliance on centralized trust models for physical gold reserves remains a key point of friction compared to native crypto assets. As competition from protocols like Morpho increases, the ability to scale this collateral usage will be a primary indicator of institutional and retail adoption in the RWA sector.