How to Lend and Borrow Assets in DeF

If you're familiar with DeFi, you know that lending protocols are one of the main liquidity providers in this space . in this post i want to show you how to supply and borrow assets in these Dapps .i use Aave because it has testnet version

P.S.: Risks are associated with these platforms and this is purely for educational purposes.

For a more practical experience, I used the testnet version. This allows you to interact and learn without any real risks. i used meta mask because it is easier to use the testnets.Here's how you can do it:

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• Start by visiting the Aave website. In the settings menu at the top right corner, activate testnets.

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• Click on the "Sepolia Testnet" option in the left corner of website

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• . for transactions on this testnet, you'll need sepolia test ETH. Obtain some by searching for "Sepolia Testnet faucet" on Google and follow the process on the Sepolia Faucet website ( sign up for Alchemy and connect your alchemy account for requesting faucet, it is free)

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• Change your network to "Sepolia Testnet" in MetaMask from the upper left corner of the app.

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• After you've received your testnet ETH, return to the Aave website. Click on the "Faucet" option in the menu and select the asset you wish to receive. For instance, I chosed wBTC. Within seconds, your test wBTC will appear on the dashboard.(these are all testnet tokens and have no value.)

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• Go to the dashboard and click "Supply," approve the amount you wish to supply, and after the transaction succeeds, click "Supply" again. After confirming, you're done – you've successfully supplied your asset on Aave as simple as that.

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another feature of lending protocols is collatralizing your lent funds to borrow money against it. in dashboard On the right corner of the website, you'll find the list of borrowable items. borrowing stable coins is the most wise choice, because when you repay your loan payinf the exact amount beside fees and interest rates.

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Click on "Borrow," choose the amount you need, and after the transaction you're good to go . With assets like BTC, you can borrow up to 70% of the supplied asset's value on these platforms However, it's not advisable to use the full allowance, as a drop in BTC's value below 70% threshold could lead to liquidation. In a separate post, I'll discuss how to determine a safe borrowing amount for lower liquidation risks.

lending platforms show The health factor for your collateral asset, typically displayed relative to 1, indicating your risk of liquidation – a value below 1 triggers liquidation process .

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there's no specific time limit for repaying your loan, and you can repay it whenever you prefer.

i hope this post helped you to learn basics of lending protocols in defi