How to Use AAVE V3 on Fantom, Polygon, Avalanche, Optimism, Harmony and Arbitrum Chains with Very Low Gas Fees

What is AAVE?
Aave is a decentralized non-custodial liquidity market protocol where users can participate as depositors or borrowers. Depositors provide liquidity to the market to earn a passive income, while borrowers are able to borrow in an overcollateralized (perpetually) or undercollateralized (one-block liquidity) fashion.

You can withdraw your funds from the pool on-demand or export a tokenized (aTokens) version of your lender position. aTokens can be moved and traded as any other cryptographic asset on Ethereum.

AAVE is used as the center of gravity of Aave Protocol governance. AAVE is used to vote and decide on the outcome of Aave Improvement Proposals (AIPs). Apart from this, AAVE can be staked within the protocol Safety Module to provide security/insurance to the protocol/depositors. Stakers earn staking rewards and fees from the protocol. Higher the utilization of a reserve the higher the yield for depositors. Depositors receive a share of the Flash Loan fees corresponding to .09% of the Flash Loan volume. You cannot borrow using stable and variable rate at the same time for one asset. You can withdraw your assets without opting out of using them as collateral, as long as those funds are not actively being used to borrow and the withdrawal would cause a liquidation on your loans.

AAVE V3 Features
Isolation mode allows Aave Governance to list new assets as isolated assets, which have a specific debt ceiling. Only certain assets can be borrowed in isolation mode—specifically, approved stablecoins. How to exit isolation mode?
To exit isolation mode, you will need to disable the collateralized isolated asset that you have supplied.
From the “Your Supplies” section, click the slider button to disable the isolated asset.
Confirm the disabled isolation mode setting. You have now successfully exited isolation mode. When E-mode is enabled, you will have higher borrowing power over assets of the same E-mode category. With Aave V3, gas costs have been optimized and reduced by around 20-25% across the board. With AAVE V3 they supported Fantom, Polygon, Abitrum, Harmony, and Optimism chains.

How to Deposit into Aave?
This is same for other Chains like Polygon, Avalanche, Arbitrum, and Optimism. I am using Fantom Metamask wallet. I have few CRV tokens sitting in my Metamask wallet. I wanted to use AAVE to put it to use. I deposited my 14 CRV tokens at 2.99% APY. I can deposit CRV at Definer on Polygon chain and earn 200% APY with more risks where your assets are not as liquid as in AAVE. AAVE supply interest rates are not the greatest. In Polygon chain, by supplying Sushi tokens you can get 9.58% APY and MATIC at 3.25% APY. I deposited 14 CRV tokens worth $19. I used them as collateral and borrowed $10 DAI at 1% APY at variable rate. I show you this next.

How to Borrow on AAVE?
You want to always borrow stablecoins from AAVE at lowest interest rate. Currently DAI can be borrowed at 1% APY variable interest rate. I decided to borrow at 1% APY variable rate instead of 5.27% Fixed APY. AAVE gives you the option of chosing the variable interest rate or fixed interest rate. I used my 14 CRV worth of $19 to borrow $10 worth of DAI at 1% APY. I deliberately chose variable interest rate because it is lot lower than the fixed interest rate of 5%.
Never borrow ETH or BTC or other nonstable coin tokens from AAVE. You can be easily liquidated if those tokens are going up in a price during a bull run.

After, I finish supply crypto and borrow crypto, on the AAVE Dashboard it shows Net APY. Net APY is the combined effect of all supply and borrow positions on net worth, including incentives. It is possible to have a negative net APY if debt APY is higher than supply APY.

AAVE Staking
Current AAVE Staking Reward of 9.3% APR.
AAVE holders can stake their AAVE in the Safety Module to add more security to the protocol and earn Safety Incentives. In the case of a shortfall event, up to 30% of your stake can be slashed to cover the deficit, providing an additional layer of protection for the protocol.

How to Replay Loans in AAVE
How do I repay with my collateral/deposits? You can repay your loan using collateral or currently available funds in your wallet.
In order to repay with your assets you just need to go to the Dashboard and follow these steps:

• Click on repay on the debt you want to repay.
• Choose repay "With your current collateral"
• Select the asset you want to repay and amount in the left side (Borrowed Asset).
• Select the asset you want to use to repay to in the right side (Select Collateral)
• Make sure to check the swap rate and check the slippage. You can edit it based on your preferences.

In Aave V2 you have the ability to swap your deposited assets, even the ones being used as collateral, to another asset.

AAVE Flashloans
AAVE provides flashloans. With Flashloans, no capital is needed to execute a liquidation, borrow funds from Aave, pay back the debt on behalf of the borrower, collect their deposit, trade it for the best available price on paraswap.io and return the assets to Aave with a small fee all in a single transaction. The remaining assets are yours to keep! It is even possible to use Flash Loans without coding skills through user interfaces as the one provided by furucombo. I will provide a FURUCOMBO flashloan tutorial below. Flash loans can be used for Self-Hedging for reckless traders, prevent self liquidation, Arbitrage, Debt refinancing — ‘Interest Rate Swap’, and Debt refinancing — ‘Currency Swap’. Currently FURUCOMBO does support Polygon chain as well as Ethereum.

Risk of Liquidation on AAVE
The health factor is the numeric representation of the safety of your deposited assets against the borrowed assets and its underlying value. The higher the value is, the safer the state of your funds are against a liquidation scenario. If the health factor reaches 1, the liquidation of your deposits will be triggered. A Health Factor below 1 can get liquidated. For a HF=2, the collateral value vs borrow can reduce by 1 out of 2: 50%. The health factor depends on the liquidation threshold of your collateral against the value of your borrowed funds. There is no fixed time period to pay back the loan. As long as your position is safe, you can borrow for an undefined period. To avoid liquidation you can raise your health factor by depositing more collateral assets or repaying part of your loan. Tools that can help you with this:

• You can track and receive notifications about your HF using HAL. Since I borrowed DAI at 1% APY, I used the HAL tool to create a notification if my DAI borrowing APY goes above 2% to notify me about it. So I can use that information to supply funds to pay off the DAI borrowing. I use HAL automatic notification to notify me if my health drops below 1.2 to notify me on my email.

How to Swap Deposits on AAVE?
How do I swap my deposited asset?
In order to swap your assets you just need to go to the Swap section and follow these steps:

• Select the asset you want to swap and the amount in the left side (From).
• Select the asset you want to swap to in the right side (From)
• Make sure to check the swap rate and check the slippage. You can edit it based on your preferences. Depending on the slippage, the expected rate might differ and the transaction might even fail if you set it too low. After this click on Continue.
• In the next step you will need to send the approval and submit the transaction. The approval transaction will only be required the 1st time you do this step, unless you revoke the approval.
• Make sure to have enough FTM for the transaction cost. After sending both transactions your swap will be complete.

In summary
As of this article writing, Harmony bridge was hacked and that is why AAVE does not have any borrowing on Harmony chain. That explain 651% supply APY for LINK tokens. Given AAVE is a very large platform with as of shooting this video TVL is 6.25 Billion Dollars. There is no risk of AAVE going belly up like LUNA. I noticed AAVE deposit interest rates are very low for stable coins. Even lower for bluechip deposits like ETH and BTC. If you want to have your crypto portfolio to grow, you need to find other platform that pays higher interest rates for deposits. I would use a tool like coindix to find better single sided pool with higher interest rates. AAVE lets you lend and borrow crypto without KYC.

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AAVE V3 Defi Portal:
https://app-v3.aave.com/