What is a Money market

A money market (Aave/Compound-style) is a pooled lending protocol:

• Suppliers deposit assets into a shared pool and receive interest-bearing tokens (e.g., Aave’s aTokens).

• Borrowers draw from the pool by posting collateral; interest paid by borrowers funds supplier yield.

• Rates float with utilization: as more of the pool is borrowed, borrow rates rise (often with a “kink” step) and supply rates follow.

• Risk controls: per-asset collateral factors (LTV), liquidation thresholds, reserve factors, supply/borrow caps, isolation lists, and (in Aave v3) features like eMode for correlated assets.

• Composability: aTokens are standard ERC‑20s accruing interest, usable in other protocols.

Important invariants:

• Liquidity is pooled: withdrawals succeed if pool liquidity is available; otherwise they may be rate-limited or partially filled until liquidity returns.

• Interest accrues continuously via indices maintained by the protocol; aTokens increase in value by balance growth (rebasing) or index scaling.