Assets Under Management (AUM)

AUM is a key performance indicator (KPI) used to assess the size, growth, and credibility of an investment platform. In DeFi, AUM often refers to the total value of assets staked, deposited, or utilized within a smart contract-driven protocol.

⚙️ How AUM Works in Traditional Finance vs. DeFi

Feature

Traditional Finance

DeFi

Management

Investment funds, hedge funds, financial advisors

Smart contracts, DAOs, liquidity pools

Control

Managed by fund managers

Non-custodial, governed by protocols/users

Growth Factors

Investor inflows, market gains

TVL (Total Value Locked), staking, lending demand

AUM typically fluctuates based on:

• Market Movements – If crypto prices increase, the AUM of DeFi platforms also rises.
• User Deposits & Withdrawals – More users locking funds increases AUM, while withdrawals reduce it.
• Yield & Rewards – Higher APYs attract users, boosting AUM.

🔄 AUM vs. TVL (Total Value Locked)

• AUM includes actively managed funds (e.g., in yield farming strategies).
• TVL measures the total assets locked in DeFi protocols, often in liquidity pools or staking contracts.

🏛 Example 1: AUM in a DeFi Lending Protocol (Aave)

Aave, a leading lending protocol, reports its AUM as the total funds deposited by users across various markets (ETH, USDC, DAI, etc.). As lending demand increases, AUM grows, reflecting greater adoption.

🏛 Example 2: Asset Management in DAOs

Investment-focused DAOs, like Index Coop, manage decentralized portfolios (e.g., DeFi Pulse Index (DPI)). The AUM of these funds depends on the total value of tokens held and managed through smart contracts.

📚 References

1. Aave Docs – Understanding AUM & Deposits
2. DeFiLlama – Tracking DeFi AUM & TVL

⚠️ Controversies & Misconceptions

• “AUM in DeFi is the same as TVL” – Not exactly. AUM can include actively managed portfolios, while TVL is passive locked capital.
• “High AUM means a protocol is always successful” – AUM can fluctuate due to market volatility and user withdrawals, so it’s not the sole indicator of long-term success.

🚀 Conclusion. AUM is a critical metric in both traditional finance and DeFi, indicating how much capital is managed within an investment strategy or protocol. It helps assess platform growth, adoption, and financial health, but should be analyzed alongside TVL, yield rates, and risk factors.