In this video, we'll look at borrowing on Aave. So, if we put some crypto on the platform as collateral, we can borrow against that, and I'll go through all of the details here. So, firstly, we can come to a, I'll link a below if you want to

get to the, uh, the site here and then connect our wallet. So, I'm going to press connect wallet. I just have a Rabby wallet, so I'm just going to connect that on my browser right here. You can use MetaMask or any of the others. It doesn't

matter if you don't have wallets yet or know how to use wallets with DeFi. I'll leave links below to videos on getting set up with Rabby and MetaMask, how to get assets into those wallets. Right, so from here, we've got our wallet connected

and I do have a balance. So, now we can actually go ahead and use these different markets. Are they supports many different markets, that's what they call them, but they're actually just different blockchains. So, if you go to the markets tab here, I'm on Bas now, you can use

Ethereum. You can use any of these blockchains. Ethereum, the Ethereum mainnet, has the largest market. You can see right here, the total, uh, borrows are about 6 billion. Market size is 16 billion. Which blockchain should you use? Uh, it doesn't actually matter. They're

all going to have different markets, but they all work in the same way, which is there's borrowers and there's suppliers of assets, and so there will be an interest rate that you can either get if you supply assets or, uh, you have to pay if you're borrowing assets. It probably

It's coming down to where you have your assets initially and what assets are supported. Ethereum has the most amount of markets. You can see them all here. So for different tokens, we're just going to focus on ETH for this example. They all of course carry ETH for the most part, so

we're going to go to let's say Base. You can see the market is a lot smaller and there are far fewer assets supported here. It depends on which assets that you actually want to lend and borrow, and then if you're actually borrowing against your assets and you want to use

the borrowed asset in other parts of DeFi, so if you're borrowing some ETH against some ETH that you have, you're actually leveraging up. You want to use that in a different protocol, then it obviously is important where you have those assets. You can choose, right? So I'm

just going to show you Base, uh, for this example now. From here, you can see there's a supply APY and a borrow APY. If you are borrowing, you first have to supply the assets anyway. So what you have to do is essentially take the borrow APY and the supply APY and then

you get a net APY that you're going to be paying if you borrow. So supply APY is 3% here, borrow APY is let's say 5%, so your net APY if you're borrowing is 2% that you're paying. You can also see this

on the right-hand side, this icon. Occasionally on different blockchains, you may get incentives. This is an incentive running at the moment, and so if you're supplying, you actually get extra incentives in some other token or or some other incentive that you might

get paid, so if you see that that's what it is, but that's a different market. Choose the one that is going to be best for you and that you have the assets on the chain that you want in order to borrow from. RV, we first have to supply

some collateral on there. So I'm going to supply some ETH. So click on ETH, and we can see this market. A works on a system called over-collateralized lending, and what this means is that we put collateral on the platform, say $10,000.

We can borrow about $8,000 against that, so 80% loan-to-value collateral rule that gives 20% buffer to a to liquidate any positions if the collateral falls in value and we can't potentially pay off our loan, we'll get liquidated before

that happens, and the same for everyone else as well. So over-collateralized lending, we need ETH on there, and then we can borrow ETH against that. So you've got wrapped ETH here, you can switch between wrapped ETH and ETH. It depends which one you want. Wrapped ETH is

obviously a lot better for DeFi if you're going to use it in any DeFi protocols like DEXs or anything like that. Probably need some wrapped ETH, but I'm just going to do ETH as an example here cuz I've got some in my wallet so

we're going to supply first. 3.21% is the APY that we're getting, so we can actually supply that. So I've got some ETH in my wallet here, so I'm just going to supply this. Press supply, and then you know how much do we want to go ahead and

Supply, so let's do something like that. Supply this amount, this is the supply APY, which is 3.23%. Collateralization enabled. I'm just going to switch the network here, switch there, we are. Supply ETH, and then we'll go through that transaction, so it's really simple. You're

just literally supplying assets on the platform. If you don't want to borrow against them, then you'll be getting this APY as a supply APY, so you can just see all the details here, and we're going to sign in, create and confirm that, and that

will supply our assets onto the platform. Now, once that's supplied, we have that collateral there to actually go ahead and borrow against. In order to check if you've got your collateral supplied properly and to see all of your positions on a net basis, go over to

dashboard here. So this is what I'm doing on this platform on this network. So I've got base here, you can see my net worth is this much, and my net APY, because I'm not borrowing yet, I'm getting a net APY of this supply APY. So just because we're

supplying, we're now getting 3.24% interest on our Ethereum. You can see the balance here, collateral that I do have, a value of that I'm using this as collateral, right? So if you're not, then obviously you can't borrow against it, so

I am using as collateral, and I do have the supply APY right here for my ETH. Now, if you want to just withdraw that, obviously press withdraw, and then you can withdraw that from the platform. We don't want to do that, right? So we just

want to keep that on the platform and you can see the these assets to supply this is the ETH actually in my wallet right now that I'm not supplying onto a it depends on what your collateral is on the platform as to what you can borrow against it for Ethereum and Ethereum

like assets so a lot of the derivatives of Ethereum like wrapped ETH or Coinbase WRA stake ETH these are mostly staked Ethereum and so they have the same price as Ethereum basically plus any staking rewards they're known as derivative products of Ethereum or like assets you

can usually borrow a lot of assets against those uh other assets for example that may be a little bit more volatile so if you go down to some of the uh smaller chains uh and you have some more volatile assets they may go into isolation mode uh which is you know

you can't borrow a lot of assets against them and you'll have a lot smaller amount of money that you can actually borrow against those assets so what I'll do is show you here so Ethereum here and if we go down to borrow info this is

important so you can see the APY and this is a variable APY this is 4.77 but you have to minus off the supply APY that you're getting right so the net APY is obviously a lot less than that down

here you can see the reserve factor this is what RV take from the interest rate paid so they're actually obviously need to make money as a as a platform so that's what the reserve factor is up here Max LTV this is loan to value loan

to the value of your collateral, 80%. So like I said, 80% of the value of our ETH, we can borrow that. So if you got $10,000 worth of ETH, you can borrow $8,000 against it. Liquidation threshold, this is the, uh, the

percentage that you get liquidated at. So if you borrow 80% of your collateral, and then ETH falls in price, what happens is that your loan-to-value has now gone up as a percentage of your collateral. Once that hits 83%, so if your loan that

you've taken out is 83% of your collateral, that's when you start to get liquidated. What happens, they just start selling your collateral to pay back the loan, to reduce the liquidate or the the loan-to-value that you've you've got. So

the liquidation penalty is 5%. So you're paying 5% as a penalty. You'll be paying some trading fees and everything. They'll sell your ETH or your other collateral, and they'll reduce the, uh, the loan that you've got to reduce your loan-to-value.

There's nothing else bad. You just get that penalty, and and there it is. But obviously, we don't want that cuz it's extra costs. Now let's go ahead and borrow some USDC against our Ethereum. So click on USD Coin. This is a stable coin

one for one with the dollar. So we're borrowing dollars against our ETH, essentially. On the right-hand side, we're going to click 'borrow'. We can use ETH. The max loan-to-value is 75% right here. So press 'borrow'. We're going to borrow $50.

and the health factor is fine, so no problems. We're going to borrow USDC. We have to go through and approve this in our wallet. Looks to be no problem. RV3, we have interacted before, so sign and confirm. We do have to pay a gas fee here.

So just make sure that you have some ETH in your wallet to pay for gas, or on the other networks you just need the layer one coin to pay for gas for these transactions. But once that's gone through, you should see now that I'll have a USDC balance in my wallet as well.

That says it's all done. You borrowed 50 USDC, so if you want to add that to your wallet, if you're using MetaMask just add it to your wallet there. I'm using Rabby, so I don't need to do that. Then we can

go back to our dashboard and now we should see my supplies and my borrows. So you can see my supplies here. APY is 3.25% on all of that ETH that I'm supplying, so I get the APY all of the time from my supply. My borrows, I'm

paying uh 6.24%, but I've only borrowed $50 right here. You can see that here and my net APY, so net worth is this much. My net APY has now come down because I'm obviously paying some interest, but on a

smaller amount, you can see my health factor is green, so no issues here. Like I said, if your collateral falls in value, your loan-to-value goes up, your health factor will go down, and of course if you want to sort that out, then you need to

put more collateral onto the platform so that reduces your loan to value so as long as your loan to value is within the range, no problems, you're not going to get liquidated. But if it does start coming down, put some more ETH or other assets on the

platform as collateral that can be used and that will reduce your loan to value and increase your health factor. Let's go ahead and repay the loan then. So if you do want to repay the loan, we go over to our borrows. You can see 'repay' on the

right-hand side. We're going to click that and we're going to use 'Wallet balance' here or 'collateral.' So which one do you actually want to use right now? If you're having a US dollar loan or a USDC loan and you need to pay back what you

loaned and interest on top of that, then you're going to need some more of that USDC on your wallet. You can of course use collateral to pay that off as well, which may be a bit easier, right? So you know if you've got some ETH in your

wallet and you don't want to switch around, you can just use that ETH. It's going to do the swap for you and everything like that. Um, if you do want to do that, it says 'approve,' right? So in my wallet, I would need to approve wrapped

ETH for this transaction first. Approve that message, sign the transaction, then you can go ahead and actually carry out that transaction. For me, I'll just uh pay off what's left of the USDC, so we're going to go 'Max' and as you can see, you don't have

enough in your wallet to actually pay for the interest because the interest accrues literally every few seconds no problem that will be a tiny loan so I'm going to repay USDC here and then go through that transaction that repays essentially all of that loan except for

the tiny bit of interest that I've got make sure everything is okay there sign in create confirm that should pay off the vast majority of that loan and the tiny bit of interest we can just leave that racking up it doesn't make any difference there many reasons why people

use R.V. to borrow against their ETH the first one is simply taking leverage so in a bull market Ethereum can easily go up a few 100% and our net APY for borrowing right here is around 3 and a half% so you get a leverage position

maybe you borrow 20% more so you have 120% exposure to ETH that can go up a lot and you're paying a decent APY for that probably lower APY than you would get if you want to trade derivatives a lot of people do that to speculate but

the funding rates you pay are a lot higher you usually compared to this what we're paying right now the downside of that is leverage introduces extra risk it's very easy to get liquidated and then your ETH is gone so you have to factor that into account another way to

use borrowed assets from a DeFi is to carry out other types of DeFi strategy for example a popular one is a funding rate arbitrage people can carry this out individually on Binance themselves there are other protocols that let you do this as well for example Athena which carry

out this arbitrage um I don't want to promote any DeFi protocol there's definitely risks here with every strategy and protocol add on the extra risks um but this is how it works essentially you carry out a delta neutral position which means you should

not have any price exposure to the asset so you take a long position and a short position they cancel each other out and so as the price moves it shouldn't actually move your position at all you should be taking almost zero price risk the risk that you're taking is the

funding rate usually in bull markets the funding rate is positive this can go up to kind of 8 10 12 15% during bull markets and that's great and we can cream that off the top however in a bull market if you wanted to carry out this

strategy you're giving up your price exposure to the assets because a delta neutral strategy like I said long and short cancel each other out so you take no price exposure so you're just getting maybe 10 12% which is great but in a

bull market things go up a lot more than that especially with crypto assets and so what you can do is use your ETH or other assets in a keep price exposure to it but then borrow those dollars against it and then carry out their strategies so this increases the amount of risk the

layering of risk on top you're borrowing you're paying interest you could get liquidated you're using other platforms so this is not risk-free but this is how people can borrow against their assets and use them within DeFi I'll leave some videos below on those more complex

strategies if you want to know more, and some deposit bonus links to the exchanges I use will be down in the description as well. I'm James, it's ManZG, cheers for watching and I'll see you in the next one.

How to Borrow on Aave (Aave Crypto Borrow Strategy Tutorial)

How to Borrow on Aave (Aave Crypto Borrow Strategy Tutorial)

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