**Let’s say:**
1. I loan 50k USDC to AAVE.
2. A borrower deposits 100k ETH in Collateral, and borrows my 50k USDC.
For some reason, I’m still able to withdraw 50K USDC (even if it’s already been lent out)
**Questions:**
1. Is this because utilisation is low enough (meaning there’s enough unborrowed money on the supply side)?
2. If utilisation reaches 100%, would I still be able to withdraw my 50k?
3. Does this mean AAVE/Compound operate on a fractional reserve?
*Is this because utilisation is low enough (meaning there’s enough unborrowed money on the supply side)?*
The Protocol tries maintain a healthy reserve of an asset so that lenders can get back their funds if they are interested. You can see the utilization of each of the assets on [aave.com](https://aave.com)
Every asset pool in Aave has an optimal threshold defined for utilization. As the utilization starts approaching this threshold, the interest rates start increasing thereby nudging borrowers to either pay back their loans or lenders to supply more liquidity. You can learn more about this here – [https://docs.aave.com/risk/liquidity-risk/borrow-interest-rate](https://docs.aave.com/risk/liquidity-risk/borrow-interest-rate).
*If utilisation reaches 100%, would I still be able to withdraw my 50k?*
Yes, this can be problematic and is a risk. Am guessing though as utilization spikes, so will the interest rates, and maybe some loans health factor may start getting affected translating to liquidation of collaterals thus making way for more liquidity. (*this is more an intuition and requires a bit more involved deep dive to confirm*)
Aave also maintains alternative sources of liquidity in protocols such as Uniswap and Balancer. Head over to [Balancer.fi](https://Balancer.fi) and you can find option to swap aDAI with DAI.
*Does this mean AAVE/Compound operate on a fractional reserve?*
Yes. They do