What You Need
- A Web3 wallet — MetaMask or Rabby connected to Ethereum mainnet or an L2
- Tokens to supply — ETH, USDC, USDT, WBTC, stETH, or other supported assets
- ETH for gas — $5-15 on mainnet per transaction, $0.10-0.30 on L2s
- Understanding of lending basics — supply, borrow, collateral, liquidation
Step-by-Step Guide
Step 1: Choose Your Network
Aave v3 is deployed on multiple chains. For lowest gas, use Arbitrum or Base. For deepest liquidity, use Ethereum mainnet. Go to app.aave.com and select your network.
| Network | Gas per Tx | TVL | Best For |
|---|---|---|---|
| Ethereum | $5-15 | $8B+ | Large positions, deepest liquidity |
| {'text': 'Arbitrum', 'highlight': True} | $0.10-0.30 | $2B+ | Best balance of cost and liquidity |
| Base | $0.05-0.15 | $1B+ | Lowest gas, growing liquidity |
| Optimism | $0.10-0.25 | $800M+ | Good liquidity, OP rewards |
Step 2: Connect Your Wallet and Supply
Connect your wallet, click "Supply" next to the asset you want to lend. Enter the amount and confirm the transaction. You will receive aTokens (e.g., aUSDC, aETH) representing your deposit — these automatically accrue interest.
Step 3: Understand Your Supply APY
The displayed APY includes the base rate (from borrower interest) plus any incentive rewards. Supply APY fluctuates in real-time based on pool utilization. High utilization = higher APY but also means borrowers are paying more.
Step 4: (Optional) Borrow Against Your Collateral
After supplying, you can borrow other assets against your collateral. Click "Borrow" next to the asset you want. Each collateral type has a maximum Loan-to-Value (LTV): ETH allows up to 80% LTV, stablecoins up to 75%. Borrow conservatively — use 50% of your max LTV or less.
Step 5: Monitor Your Health Factor
Your Health Factor is displayed on the dashboard. Keep it above 1.5 for safety. Set up alerts using DeBank or Aave's notification system. If your Health Factor approaches 1.2, add more collateral or repay some debt immediately.
Step 6: Enable E-Mode for Higher Efficiency
If your collateral and borrowed asset are correlated (e.g., stETH collateral, ETH borrow), enable E-Mode in settings. This increases your max LTV from ~80% to ~93%, letting you borrow significantly more with the same collateral. Only use E-Mode with truly correlated assets.
Step 7: Repay and Withdraw
To close your position: repay your borrowed amount (plus interest accrued), then withdraw your supplied collateral. You keep all interest earned. The process requires 2 transactions (repay + withdraw) on the same chain.
Fees and Costs
- Supply gas: $5-15 on Ethereum, $0.10-0.30 on L2 (one-time)
- Borrow gas: Same as supply — one transaction per borrow
- Interest rate (borrowing): Variable rates: USDC 5-12% APR, ETH 2-5% APR, stablecoins 6-15% APR depending on utilization
- Aave protocol fee: Aave takes a portion of the spread between supply and borrow rates (built into displayed APYs)
- Liquidation penalty: If liquidated, you lose 5-10% of your collateral as a bonus to liquidators
Risks
- Liquidation risk: The biggest risk for borrowers. A sudden 20% price drop can liquidate under-collateralized positions, losing 5-10% of your collateral
- Smart contract risk: Aave v3 has been extensively audited (Sigma Prime, Trail of Bits, others) but DeFi smart contracts always carry some risk
- Interest rate risk: Variable rates can spike during high-demand periods. A rate that is 5% APR today could jump to 30% APR during a market crash
- Oracle risk: Aave relies on Chainlink oracles for price feeds. Oracle failures or manipulation could trigger incorrect liquidations
- Stablecoin depeg risk: If you supply or borrow stablecoins, a depeg event (like USDC in March 2023) can disrupt your position
Pro Tips
- Leveraged staking strategy: Supply stETH, enable ETH E-Mode, borrow ETH, swap to stETH, supply again. This creates a ~6-8% APY yield loop (vs. 3.4% plain staking). Risk: liquidation if stETH/ETH ratio depegs
- Supply stablecoins on L2 for best risk-adjusted yield: USDC on Aave Arbitrum earns 4-8% APY with minimal smart contract risk and near-zero gas costs
- Use variable rate, not stable rate: Stable rate borrowing is almost always more expensive. Variable rates are lower 90% of the time
- Set Health Factor alerts: Use DeFi Saver's automation to auto-repay if your Health Factor drops below a threshold — avoiding manual liquidation panic
- Compound your earnings: Withdraw and re-supply periodically to compound your yield (more impactful on L2 where gas is cheap)
Aave is the closest thing to a decentralized savings account. For passive lenders, it offers reliable yield. For active DeFi users, it unlocks leveraged strategies that amplify returns. Start with a simple supply position and only add borrowing once you understand Health Factor management.
Related guides: How to Stake Ethereum | How to Use Liquid Staking | How to Farm Yield in DeFi
Frequently Asked Questions
How much can I earn lending on Aave?
Supply APY varies by asset and market demand. In March 2026, USDC earns 4-8% APY, ETH earns 1-3% APY, and USDT earns 5-9% APY. Rates fluctuate based on borrow demand — higher utilization means higher supply rates but also higher borrow rates.
What is Health Factor on Aave?
Health Factor is a number representing how safe your borrowed position is. Above 1.0, you are safe. Below 1.0, you get liquidated. For example, if your Health Factor is 2.0, the value of your collateral can drop by 50% before liquidation. Most users maintain a Health Factor above 1.5 for safety.
What is Aave E-Mode?
Efficiency Mode (E-Mode) allows higher borrowing power when your collateral and borrowed asset are correlated. For example, in ETH E-Mode, you can borrow up to 93% LTV against stETH collateral (vs. 80% normally). This is useful for leveraged staking strategies where both assets move together.
Can I get liquidated on Aave?
Yes. If your Health Factor drops below 1.0 due to price movements, Aave allows liquidators to repay your debt and claim your collateral at a discount (5-10% liquidation bonus). To avoid this, monitor your Health Factor and maintain it above 1.5, especially during volatile markets.