Aave uses a similar model with interest accruing per unit. The main difference is that the aTokens value is tied to the base token value in the ratio 1:1. The interest is distributed directly among the aToken holders by constantly increasing the balance of aTokens on their wallet. Owners of aToken may also decide to redirect their interest payments to another Ethereum address. When it comes to borrowing, users block their cToken or aToken tokens as collateral and borrow other tokens. The pledge pays interest, but users cannot buy or transfer assets as long as they are used as collateral. What is the cost of collateral? To determine the collateral value, Compound uses its own price flow, which takes prices from several highly liquid exchanges. On the other hand, Aave relies on Chainlink and, if necessary, resorts to its own prices. Perils DeFi lending, while reducing many of the risks associated with central finance, has its own risks. Mostly constantly present risks of smart contracts, as well as fast changing APY. For example, during a recent infatuation with profitable farming, borrowing APY on a BAT token increased to more than 40%. This may result in unaware users who do not track complex daily interest rates being eliminated due to the need to pay more than expected over the same period of time.