Aave is one of the largest DeFi lending protocols, allowing you to earn interest by lending crypto or borrow against your holdings without selling them. This practical guide walks you through using Aave step by step.
Lending on Aave
- Go to app.aave.com and connect your wallet (MetaMask)
- Select the network (Ethereum, Arbitrum, Optimism, etc.)
- Choose a token to supply (USDC, ETH, DAI, etc.)
- Enter the amount and click “Supply”
- Confirm the transaction in MetaMask
- You immediately start earning interest — no lock-up period
Current rates vary: stablecoins typically earn 3-8% APY, ETH earns 1-3% APY. Rates change based on supply and demand.
Borrowing on Aave
- First, supply collateral (e.g., deposit ETH)
- Click “Borrow” and select the token you want to borrow
- Enter the amount — you can borrow up to ~80% of your collateral value
- Choose between stable or variable interest rate
- Confirm the transaction
Why borrow? You get cash (stablecoins) without selling your ETH. If ETH goes up, you still benefit from the appreciation. You repay the loan whenever you want.
Liquidation Risk
If your collateral drops in value below the required threshold, your position gets “liquidated” — the protocol sells your collateral to repay the loan. To avoid liquidation: keep your loan-to-value ratio conservative (below 60%), monitor your health factor, and add more collateral if prices drop.
Safety Tips
- Start with small amounts to learn the mechanics
- Use stablecoins for your first lending experience (no price risk)
- Never borrow the maximum amount — leave a safety buffer
- Monitor your health factor daily when borrowing
- Aave on L2s (Arbitrum, Optimism) has much lower gas fees
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