Summary
Anyone can lend their crypto by depositing it in DeFi protocols. Lenders will receive interest on their deposited assets. Lenders can also use their deposited assets as collateral for a loan.
Table of contents
The basics of lending in DeFi
DeFi allows people to borrow cryptoassets from a pool of lenders. The lenders receive yield from the interest borrowers pay. If you are new to the idea of lending or borrowing, please read the following article: What is crypto lending?
Introduction to Aave
Aave, a leading DeFi DApp, exists on multiple chains, including Ethereum and Avalanche. The Bitcoin.com Wallet supports DApps on both chains through WalletConnect.
You can read more about WalletConnect here.
Here’s a guide for how to use WalletConnect.
Supplying assets to Aave allows you to do two things:
Earn interest on your deposit (APY).
Use your deposited cryptoassets as collateral for a loan.
The importance of Loan-To-Value
The ratio between a loan and collateral is called Loan-To-Value, or LTV for short. LTV is only important if you intend to use deposited assets as collateral to borrow.
The LTV ratio defines the maximum amount of assets that can be borrowed with a specific collateral. For example, imagine you deposit ETH as collateral. The LTV can change over time, but let’s imagine it has an LTV=75%. This means that for every 1 ETH worth of collateral, you will be able to borrow 0.75 ETH worth of the corresponding asset, such as DAI or USDC.
High volatility cryptoassets like Wrapped Bitcoin, Ethereum, and particularly other lesser known coins can see rapid decreases in value. If you use these assets as collateral and the value of those assets rapidly depreciates, you can be liquidated before you can add more collateral. Stablecoins are much less volatile, and are the preferred collateral for that reason.
In Aave, it’s important to watch the Health factor of your loans.
Step-by-step guide to lending on Aave
Here’s how to supply cryptoassets to Aave:
Go to https://app.aave.com/
Choose WalletConnect as the connection method, and select Bitcoin.com Wallet.
In the Bitcoin.com Wallet, approve the connection request.
On Aave, you can choose amongst an available list of assets to supply (deposit). Notice that each available asset has a different APY. If you do not have any eligible assets, you will need to acquire one. You can swap for eligible assets directly in the Bitcoin.com Wallet. Check out this article for more details.
When you’ve decided on an asset to deposit, click the “Supply” button. Decide how much to supply by typing a number, or clicking the “MAX” button to supply all of the available asset.
Aave will calculate an estimate for your gas cost. When this calculation is finished and you are willing to pay it, tap the “Supply XXX” button (where XXX is the cryptoasset you are supplying).
You will be taken to the Bitcoin.com Wallet (or select the Bitcoin.com Wallet). In the Bitcoin.com Wallet, approve the transaction. Note, the final gas fee (Network fee) might not match the estimate provided by Aave.
Return to Aave and wait for the transaction to finalize. This can normally take up to 10 minutes depending on the congestion of the network.
When the transaction finalizes, an “All done!” popup will appear. Congratulations, you have deposited funds with Aave. You are now earning the specified APY, and can borrow cryptoassets based on this collateral.
Step-by-step guide to withdrawing from Aave
Here’s how to withdraw cryptoassets from Aave:
Go to https://app.aave.com/
Choose WalletConnect as the connection method, and select Bitcoin.com Wallet.
In the Bitcoin.com Wallet, approve the connection request.
In the “Supply” tab, navigate to the cryptoasset you wish to withdraw, then tap the “Withdraw” button.
Decide how much to supply by typing a number, or clicking the “MAX” button to withdraw all of the available asset.Aave will calculate an estimate for your gas cost.
Tap the “Withdraw XXX” button (where XXX is the cryptoasset you are withdrawing).
You will be taken to the Bitcoin.com Wallet, or select the Bitcoin.com Wallet. In the Bitcoin.com Wallet, approve the transaction. Note, the final gas fee (Network fee) might not match the estimate provided by Aave
Return to Aave and wait for the transaction to finalize. This normally can take up to 10 minutes depending on the congestion of the network.
When the transaction finalizes, a “All done!” popup will appear. Congratulations, you've withdrawn these funds from Aave.