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In our previous guide, we staked ETH with Lido and received some stETH in exchange. Now that our ETH is cozy and gaining us some staking rewards, it’s time to put our stETH to work to further compound our yield. This will be a multi-step process, and it starts with using stETH as collateral on Aave - an open source and non-custodial liquidity protocol.
If you haven’t completed the previous task yet, it would be best to start there before moving forward here.
What Do I Need?
Before we get out on the path, let’s make sure you’ve got your gear in order. In order to lend stETH on Aave, you will need:
- An Ethereum wallet, such as MetaMask or Rainbow
- ETH in that wallet
- stETH in that wallet
If you need help getting any of this set up, head over to our YouTube Channel. There, you’ll find guides for setting up your wallet and purchasing some ETH!
Lending & Aave
Got everything you need? Okay, let’s see where we’re headed.
In the traditional financial world, centralized institutions like banks and credit unions act as lenders, loaning out money to borrowers. But in the DeFi world, where these centralized institutions don’t exist, users are the lenders.
Aave is a permissionless lending protocol where everyday users can lend and borrow cryptocurrencies without the need for a centralized figure. Lenders, or depositors, deposit assets on Aave to earn interest or use them as collateral to borrow against. By lending our stETH, we will have the collateral we need to borrow USDC for the next part of our journey. More on that later.
Aave is also non-custodial, meaning depositors retain ownership of their lent assets and are in complete control of them at all times. Aave has gone the extra mile to mitigate risk and make their platform as safe as possible, but there are always risks associated with using any decentralized finance protocol. You can learn more about Aave’s Risk Framework here.
Alright, now that we’ve got the lay of the land, let’s get started!
The Guide
Step 1
Head over to aave.com and click Launch app.
Step 2
Click Connect wallet, select your wallet provider from the options shown, and connect your wallet.
Once your wallet is connected, you’ll be brought to your Dashboard. Here, you will see lists of assets you can supply and borrow.
Step 3
Under the Assets to Supply section on the left, select stETH by clicking its name or the Details button.
You will be taken to the stETH deposit page where you can find important information about stETH, including its current price, available liquidity, maximum loan-to-value ratio (max LTV), and liquidation threshold. The available liquidity refers to the total amount of an asset currently being lent on Aave, and the max LTV is the maximum percentage of a deposited asset’s value that can be borrowed. We’ll talk more about these metrics when borrowing in our next guide.
Step 4
Click Supply on the right to begin your deposit. Enter the amount of stETH you would like to deposit, then click Supply stETH.
Step 5
If this is your first time depositing stETH on Aave, your wallet will prompt you to give Aave access to your stETH. This is a one-time transaction and has a small gas fee associated with it. Go ahead and confirm this transaction in your wallet and pay the gas fee.
Step 6
After you have given Aave access to your stETH, you will be prompted to confirm the actual transaction to deposit your stETH. Simply confirm the transaction in your wallet and pay your second, but final, gas fee.
Step 7
Once that transaction has been confirmed, you have successfully deposited your stETH!
You will also be prompted to add Aave’s aSTETH token to your wallet. This aSTETH represents the stETH you deposited to Aave at a 1:1 ratio. Adding the token to your wallet is safe and requires no gas!
Congratulations!
Back on your Dashboard you will now see your deposited stETH under the Your Supplies section.
Now that we have lent our stETH on Aave, we’re ready for the next leg of our DeFi journey - using it as collateral to borrow USDC!