Aave Tutorial (How to Borrow & Lend Crypto)

Summary

This tutorial guides viewers through the process of lending or borrowing against crypto assets using a decentralized finance platform. It highlights the benefits of earning yield on lent crypto and the convenience of obtaining loans by using crypto as collateral, without a traditional approval process. The video explains how to connect a web3 wallet to the platform, choose assets for lending or borrowing, and select transaction chains for lower fees. It discusses the risks of liquidation, the importance of monitoring the loan-to-value ratio, and the variable interest rates affecting loans and yields. The tutorial concludes with a step-by-step demonstration of lending USDC, taking out a loan, and managing loan repayment, emphasizing the need for caution due to crypto market volatility.

Takeaways

• 💰 Lending your crypto on A can earn you a yield, offering a productive use of your assets.
• 🔒 Using crypto as collateral, you can take out loans without a traditional approval process, making it accessible to anyone.
• 🚫 If you fail to repay the loan with interest, your collateral will be liquidated.
• 📈 There's a risk of liquidation if the value of your collateral decreases too much compared to the loan value.
• 💻 To get started, connect your web3 wallet to app.A.com and the platform will detect your assets for lending or borrowing.
• 🛠 You can choose different blockchain networks for transactions, with Ethereum layer 2 options offering lower fees than the main net.
• 💵 The APY for lending is variable and depends on the demand and supply of the asset.
• 💳 Borrowing involves understanding the maximum loan value, which should ideally be less than the maximum to avoid liquidation risks.
• 🛡️ The health factor indicates the safety of your loan; staying well above a health factor of 1.0 helps avoid liquidation.
• 📊 A's platform allows for complex strategies like re-supplying borrowed assets as collateral, but requires careful management of the health factor.

Q & A

What platform is being used in the video to lend and borrow crypto assets?

The platform being used in the video is Aave.

What are two benefits of lending out your crypto on Aave?

Two benefits of lending out your crypto on Aave are: 1) You can earn a yield or interest on the crypto you lend out. 2) You can use the crypto you lend as collateral to take out a loan.

What chain does the video recommend using for lower transaction fees?

The video recommends using an Ethereum layer 2 like Arbitrum for lower transaction fees compared to the Ethereum mainnet.

What happens if you don't repay a loan on Aave?

If you don't repay a loan on Aave, you will get liquidated and lose the crypto assets you put up as collateral for the loan.

How can you get notified if your loan gets close to liquidation on Aave?

You can set up an alert on Aave so it notifies you automatically if your loan gets below a certain health factor, indicating it is at risk of liquidation.

What is the main risk when borrowing close to the maximum loan amount?

The main risk is that even a small change in the relative price of your collateral vs the borrowed asset could trigger liquidation.

What happens when a liquidation is triggered?

When liquidation is triggered, your collateral is automatically sold to repay the loan, without any actions you can take to stop it first.

How can you track the yield earned from lending and interest rate paid from borrowing?

The net APY figure at the top of the Aave dashboard calculates your total yield from lending minus the interest paid from borrowing.

Where can you see the assets that currently have the highest supply and borrow rates?

You can click on the Markets tab in Aave to see the assets with the highest supply and borrow APY rates.

What do you need to do before being able to withdraw assets you supplied?

Before withdrawing supplied assets, you first need to repay any open borrow positions to free up your collateral.