Managing Risk in DeFi Using AAVE

Transcript

DeFi Slate team. What's up, y'all? Real quick, if you like the DeFi Slate content on Twitter and YouTube and Substack, please, please give us a like and a subscribe on this video on YouTube. Um, join our channel, join the community. We'd really appreciate it. We're pumping this stuff out for y'all as much as we can, and we really enjoy the support and the community that we've built. Thank you very much. Enjoy. What's up, guys? Welcome to an episode of whatever this show is called, where we're going to help you get started in DeFi, um, and do something cool today.

So, today we're going to show you how to use Aave and a few strategies that you can use to basically, uh, put your capital to work and turn your assets in crypto into productive assets, earn some yield, and kind of get active in the lending and borrowing, um, protocols. I mean, I think that's like the easiest thing to get started with. That's like one of the first things that I did, uh, which is kind of get active into Aave and Compound. Uh, so we're here today with Alex, who is the risk lead, uh, at Aave, of course Robbie. Uh, she's going to take us into a deep dive of what happened, uh, two weeks ago on Bloody Wednesday, how Aave held up, how the whole DeFi ecosystem held up, uh, what is going on at the Aave risk DAO, and she's going to show us some dope

strategies. So, I'm excited for this one. Sit back, relax, tune in, and here we are. Rob, anything to to get us started? Yeah, super, super. So, um, I'm I'm I'm super psyched to talk to Alex. Um, Aave, if you don't already know, is pretty much the powerhouse of DeFi. Um, a lot of it, you know, really starts with Aave, whether it's lending, borrowing, you know, what whatever you want to do, Aave is that high yield savings account that you can employ a lot of strategies at. Um, so I'm I'm stoked to talk to Alex and learn about, uh, some of the events that happened a couple weeks ago. Um, you know, we're we're still moving through the darkness when it comes to DeFi and and seeing how these protocols react to certain stressful events

just gives us more insight into how they operate. So, yeah, I'm going to pass it off to Alex and let her introduce herself and then we can dig into Aave. Hi everyone. So, yeah, I'm Alex. So, I'm the risk manager at Aave, the liquidity protocol. And so, I've been there about 2 years. So, it's been quite interesting to witness the launch of V1, the launch of V2, the different improvements of the versions and get gathering community feedback and working with that.

In terms of like working on the risks of Aave, it's it's actually quite quite a big role because you know, the protocol is constantly growing. And so, with the growth of the protocol, my role is also quite evolving from as I started more very technical role. My background is I'm an actuary. So, I'm a specialist of risk quantification. And so, I started my career in insurance. And so, I'm bringing kind of all these actuarial methodology and financial modeling tools to DeFi and trying to kind of raise the standards a bit to make sure that we're equipped to face events like last week.

And I guess now with the Aave DAO growing and the community becoming bigger and bigger, I also spend a lot of time community building. So, you know, I'm I'm always connected. So, feel free to reach out actually on Twitter or on Discord or on Telegram. I spend a lot of time answering questions and helping people understand their way through the Aave protocol and the Aave APIs for example. Awesome. So, Alex, could you walk us through kind of what a normal day looks like at Aave? And kind of what that means when in terms of financial modeling and and how you think about risk when it comes to DeFi?

Sure. So, um, so, you know, every day, first thing now for for 2 years when I wake up, I check uh Aave scan or directly the Aave website and I check like all the reserves um that the utilization is good. So, so basically, um yeah. So, so to understand why I do that, let let's go back to actually let's start with the risk of risk of Aave because now I I'm jumping ahead a bit already. So, um so yeah. So, Aave is a liquidity protocol and as you said uh users can deposit uh assets on the protocol and borrow against these assets. So, so basically, uh there is borrowing. So, um as long as the collateral is worth more

than the borrows, uh the there is a guarantee that makes sure the protocol is solvent. But, in the case the value of the collateral falls or the value of the borrows increases and so there is less guarantee than there is debt, then um there is a risk of insolvency and so that's kind of the the ultimate risk of a liquidity protocol that does uh lending and borrowing with lending and borrowing and uh debt is that the the the solvents that there is insolvency.

So um so to to manage this risk, uh it's really important that um the the protocol only adds assets that uh have a reasonable level of risk and also once assets with a reasonable amount of risks uh are identified, well, the risks of each of these assets needs to be understood so that the model can be calibrated appropriately to handle them. So, um there is a an entire risk framework that kind of describes the process that uh there is a kind of a risk algorithm every risk algorithm that uses quantitative data to try to understand and break down the

the risks with a basic score. So some of the key risks to look at um here uh we focus on smart contract risk. And so smart contract risk, I mean that's that's a fundamental risk in in DeFi and all the projects, all the tokens are affected or smart contract based. And so it's the the risk that the code doesn't operate as intended. And it's really hard to manage that risk because actually no matter how many audits or no matter how battle tested the contract is, the risk is still there and there is always something that can filter through. So in the methodology what is used is proxy for battle testing

and we're just looking at the number of transactions and the the maturity. And as well, well it's important to look at all the audits, all the even looking to the smart contracts. So some smart contract experts need to understand often actually the projects we use code from other projects which kind of add a bit of security. Uh the second fundamental risk is the governance risk of the assets and so that's basically the risk that uh the the the management of the protocol or of the asset falls into ill-intended hands that can change the way the protocol works or the rules and that's damaging to the protocol or

the token. And so that's a bit more tricky to assess and it can't be done purely quantitatively because actually it's it's necessary to drill into the code to understand the permission level, if there are some admins that have specific rights or if there is a multi-sig that can upgrade or even uh the worst possible risk if there is a multi-sig that can mint tokens. Because for example, if an asset that has been listed on one of Ave markets suffers an exploit or just suffers large mint then this asset can be deposited on the Ave protocol. I mean, if it's listed and the liquidity on the Ave protocol

can be borrowed against it. So, you know in theory, all the liquidity available can be borrowed against it and so the protocol will be completely drained and depositors will lose would not have access to their funds anymore. So, so that's a very significant risk as well. And the last risk that's that's that's in the framework is the market risk. And so, that's a risk that's quite important to track and and it's maybe the most the fastest evolving risk of them all. So, the the other the other two risk we've covered, I mean, it's it's an ongoing monitoring but

for example, the smart contract risk, I mean you just kind of have to keep updated with the news and if there is news rather than for the market, the the prices, the liquidity, the volume is constantly changing and so you need to be sure at all times that you know, monitor the volatility, monitor that there is enough So, the volatility is important because you need to make sure that the assets used as collateral are capable of holding value. Because if they lose their value very sharply, then it's not really that great of a collateral.

The liquidity, that's also key and that's a factor that people often forget actually. So, liquidity is needed for assets used as collateral because when there is a market crash, well, these positions need to be liquidated and so there needs to be liquidity on the market to liquidate them. So, there is a lot of requests on the on the forum, for example, users requesting to list additional assets on the Polygon market, but a lot of assets don't have yet uh large liquidity on Polygon. So, basically, the liquidity needs to come before listing the asset on the liquidity protocol for it to be healthy and

prudent. Yeah, that makes sense. If uh if what happened on Wednesday, I think it was like 2 Wednesdays ago, now 2 weeks ago, uh happened on on Polygon today with a bunch of illiquid um assets, right, that are only on QuickSwap or SushiSwap, it it would be rough. Um so, thanks for outlining the three risks for us. Uh again, smart contract risk, which is basically bugs in code, exploits, hackers. Um the final risk was the market risk, ups, downs, and sideways. And the second risk was badabada boom. Uh my goodness. It was the Robbie, help me out here.

Governance. It was governance. Governance, of course. If a token goes AWOL, then then you then we're all screwed. I mean, I I can only imagine where if we're just printing a bunch of state engine tokens and just dumping them all and borrowing against and just Oh, yeah, no bueno. So, that's what your day-to-day has been, just covering all of these, making sure that uh that's all good and taken care of. Um so, briefly, before we hop into the strategies of how people can can use Aave safely, um I would just love to hear a kind of a recap of what happened that Wednesday, kind of, you know, is there any actions that you took or that the the community took as a whole? You know, what was your take about how DeFi held up? You know, specifically Aave. You know, we we already mentioned briefly prior to

recording about the stablecoin pegs. You know, how did that affect the debt? Um so, I guess just like a quick recap of what happened on that bloody Wednesday and kind of what you think um you know is is you know how DeFi held up would be awesome. Yeah, so so yeah, so on that bloody Wednesday which was I think the the 19th. So basically Ethereum had a 47% volatility from the highest point to the lowest point and so other assets listed on Ave had up to 70% drop from from their highest points.

And so basically so these volatile assets, these are the assets that are mostly used as collateral on Ave. And so most people borrow in stable coins. So in parallel of that market drop, we also witnessed some volatility in the stable coins that in theory are just worth $1. Some of those stable coins dropped to 85 cents which if you borrow with if anything it's favorable if if the value of your borrowed drops. Others value increased to 113 I think. So that's a bit more problematic because if your collateral drops and then your borrowed amount increases, it's kind of the worst that could happen for for borrowing position.

So so this generated basically a lot of a lot of position on Ave became a health factor dropped to one and below one. So so yeah, once once your health factor drops to one, you can get liquidated. And so what does it mean when you get liquidated? It means that you can lose up to 50 sorry, a liquidator can repay up to 50% of your debt per token and then in exchange that the liquidator gets the corresponding amount of collateral plus 5 to 15% bonus depending on the on the assets. So overall on that Wednesday, over 300

million were liquidated on Ave. And so, what what were was was I doing during that time? Typically, I was kind of moni- monitoring, looking at the portfolio of borrows, and looking at the big positions that were becoming closer to one until they reach one, and it was really impressive to see that actually there is a very strong liquidator network on Ave, and it's the first time the magic liquidator network is tested, for example. So, you know, that was why it was really important to monitor, but most positions got actually liquidated within even the first block quite often. So, this means that as as soon as they appear, they get liquidated.

And so, this this shows that the protocol is working well, the incentives are working well. I mean, for me, I mean, I think, you know, thanks for having me here, because for me this this week was kind of a reminder that actually we need to also help our users be more prudent, because you know, I think some people, okay, if you get liquidated on the 19th, well, you know, that was really kind of a drop and surprise. But then, the following week, the market continued being shaky, and and so, you know, I think once you see there is a lot of market volatility, it's really important to make sure that you can handle it, and that you have some margin to handle it.

So, once the, you know, your health factor should always be above two or three, but if the market is ultra volatile, that's even more important. You need to have it at three, 3.5. And basically, it's quite easy. If your health factor is at two, it means that the collateral value compared to the borrow value can be divided by two. So, you can support 50% drop. If your collateral is at four, it can be divided by four, so you can support 75% drop. So, that's kind of a quick memo technique around it.

Yeah awesome. Yeah, so there was more liquidations that following week as as well then, huh? Yeah, exactly. So, liquidations kind of continued until the weekend and um No way. Overall, there's were like 450 millions of of liquidation in the month of May. So, Yeah, which is not even a lot compared to like um you know, like a Binance and FTX with which offers like 10X. They had billions in liquidations, but that's just because their collateral's yoked up so much that that that they have a large notional size. I mean, I was in my underpants at 9:00 a.m. with the health factor and the ones and I was I guess it's at 1,600 way and I just accepted my fate at that

point. I was like, if I get liquidated, here we are. And we didn't get liquidated. We were close. I was like, here we are, boys. Like, this is it. You know, what? This is This could be over, but anyways, we're we made it out. you could always repay with your collateral. Yeah, gas was 1,600 way. I didn't even have enough ETH in my MetaMask. It was just Yeah, anyways, I I I might not be the best example to follow, but I'm learning and you know, we we didn't get liquidated and we're doing well now. So, let's maybe show how to use Aave in a safe way. Um and show the users how to not be in a position like such.

So, Alex, I do have a couple questions before we get into the screen share. Just just real quick, kind of getting back to those three different risks. In any one of those cases, and what really triggered us in my mind was that smart contract risk. If you realize that a a token is getting drained or has been taken over, you know, by the governance um What are What are the steps that you take? Is it kind of a manual delisting of that asset? Um or is it something that happens like an on-chain vote? Like, what is the process to remove that risk if uh it starts to present Yeah, so that's kind of the challenge because, you know, with Aave being a DAO, well, basically every update has to

go through governance. So, it would need to, I guess, you know, if if if an asset becomes too risky, uh, you'd have to The problem is if it's already used as collateral, you don't want to you don't want to affect those borrows which or you want to give people time to adapt. So, so, you know, I guess that the first step would be to kind of pass a proposal to lower the LTV to zero to avoid further exposure. And then also the the liquidation threshold progressively, but yeah. So, so, that that's why it's it's it's quite important to be ultra prudent because, uh,

prevention is easier than than action in that case when there are time locks and things like that in place. And gas would go to the moon. Yeah. Yeah. There is actually, during the community call, um, Aave V2.5 was announced. And in that version, uh, there will be some exposure ceilings per assets. And so, that will be a really powerful addition because it will limit the surface attack in case of, uh, this kind of act or infinite mints.

Awesome. So, it wouldn't be really a quick change um, even if a protocol is getting drained, it would be more progressive as it moves through governance. Um, yeah, cuz you need to you need to protect the people that are using that as collateral, uh, even even if there is an exploit. Um, cool. So, that that makes sense there. My my other question before we get into the screen share is kind of on the liquidator side. Um, you mentioned that, you know, on on Matic it was really the first time that the liquidation network got tested. How how can someone become a liquidator? Is this, you know, profitable for kind of a mainstream DeFi user or is it, you know, very technical? Um kind of, you know, what are the steps? What do you

suggest for someone that might be looking into uh liquidating some positions and try to, you know, either hedge or get some sort of income that way? Yeah, I think I mean liquidations are definitely a really counter good counter cyclical business uh because, you know, those nearly $500 of liquidation they resulted in 50 million bonus or liquidation fee. So, uh it can be really profitable. It is very competitive. So, um I'd say kind of you know, you you you need to be a developer if you want to build a bot that's better than the other bots and that's capable of front running the other bots.

Um there there is a bit of information on the documentation on on the Ave documentation and so it's actually quite easy to run kind of from a Linux terminal. Uh the the functions are very basic. You can also actually do it manually through Etherscan. But so, same thing then, you know, it's manually how are you going to front run uh some machines? Um and and actually um there is a live stream tomorrow uh on the subject. So, uh so that's going to explain a bit more how to how to Emilio is going to explain a bit more how liquidations work and also how we can improve the liquidations.

Awesome. Yeah, and uh that's why gas ramps up so high, you know, people trying to liquidate and then those with positions trying to avoid liquidation. For sure. And then those like I mean we just accepted our fate and just did nothing. Yeah, I mean I was I was at my laptop when gas was at 2,000 and I must admit that for this whole like half hour hour it does feel like time kind of stopped in hell for an hour and then we just emerged again. It was a weird event also to experience from your private office at your home alone rather than, you know, Yeah, everybody in the computers and on the phones like, "Yo, like what's going on?"

Yeah. Yeah. Andy mentioned it I think while it was happening. It kind of felt like, you know, we were just huddled in that like boiler room, but then there's all the people, you know, walking around outside on the beach having fun, and they have no idea that everyone's health factors at 1.2 and like, you know, everyone's running for the hills and gas is at 4,000. So, yeah, we're kind of in a world of our own when it you know, when it comes to that. Cool. So, let's dig into Aave, and Alex, maybe you can share your screen and we can show the Aave dashboard, and then go through some strategies.

Yes. Okay. Cool. Okay, so I'm going to do a small demo mostly on Aave Polygon because it's probably the best market to start with transaction fees that are nearly non. And but actually there are a few markets on on Aave. So, the Aave V2 market is the biggest one with 13 billion dollars and also most the more different assets on it.

Then you have the AMM market which is the automated market maker market which is for liquidity pools. So, that's already for pretty advanced DeFi users, and you can use your liquidity pool token as collateral. If you're just a depositor, this market is usually quite interesting for in terms of deposit APY because it's less well known. But it doesn't benefit from liquidity mining like V2 and Polygon.

And now Polygon the Polygon markets uh so that's on the Polygon side chain. Uh and it's the most recent the the latest launched market, but it's already reached 8 billion of liquidity and also the number of users on the Polygon market has already surpassed the number of users on the V2 market. So, uh it's been a real success. That growth is awesome to see. Yeah. Yeah. Yeah. And also it's good because I mean so the the growth of the Matic network has been really uh incentivized by Polygon who uh the the Matic the Polygon market uh who gave generous incentives and their token has performed so well since the launch that

the incentives have not stopped getting better. So, it's pretty good. The yield in the Matic buyers. Okay, so the first step when you use Aave, so uh here is the general view of the Matic market where you can see all the assets uh and so all the assets can be deposited or borrowed except Aave that can only be deposited. Uh you can't borrow Aave because otherwise uh it's possible to attack the governance of Aave. So, that was a an ecosystem choice. And so, on the Polygon market there is no stable borrowing, but on the main market there is stable borrowing which can be quite

practical to uh manage your long-term borrow cost um and have a fixed rate. in times like right now when the borrow APY is low. It's good to like lock in a stable rate. Yeah, exactly. Yeah. And then when the market pumps again and goes crazy, you're so happy to see you're only paying 4% and everyone else is paying 30%. Yeah. So, let's go over a like a a bullish strategy to start. Um so say somebody has some ETH or you know whatever you have in the wallet there, you know, what's something that that you know, what's a safe way to have established a bullish position?

Yeah, so right now I have magic on my wallet. So let's say I'm bullish on magic and so I need a fridge, but I still want to keep my magic and so actually this is a real-life example because I have financed my fridge with an Ave loan. So first I'm going to deposit my magic on Ave. Here you have to be always careful and that happens on the V2 markets as well. It can be very tempting to just press max, but you need to keep some magic for your transaction fees. So yeah, just just let's just deposit 750 magic.

Continue deposit. And this is normally where our editor would have to cut the video to you know, for the transaction taking so long. But yeah, that's what's cool about polygon is you know, it should only be a few seconds before that this transaction is confirmed. There we go. Yeah, so that's it. It's confirmed. So now if you look at my dashboard, I have the 750 polygon deposited. Whenever you get a deposit like one thing that's really interesting is that your deposits are always working. So here I'm getting 3.71% APY from users borrowing magic. And I'm

also getting 5.68% APR from magic liquidity mining. So this is APR the liquidity mining because it's not compounding. So this means that you actually need to claim the rewards here and if you want to earn on your rewards, you need to redeposit them. Whereas the yields generated by uh automatically compound. A quick question, Alex. Is there any tools or does Aave have anything coming soon for an auto compounding you know that will automatically redeposit your your rewards?

Uh not that I'm aware, but I think there are some smart wallets that may offer it such as DeFi Saver or Instadapp. Got you. Cool. Um yeah, so So now that you have your deposits, so you're you're already earning and so now you think MATIC is going up, you don't want to sell, but you still need to buy a fridge. So you're going to borrow and so you're going to borrow something stable so that you keep the difference between the price increase potential future price increase of MATIC and your borrow. So here you the different assets available uh So how how do you decide? So you have to

look at the borrowing costs. So because on the on the Polygon market borrowing is incentivized, the borrowing cost is actually 3.96% - 4.73%. So here you're actually nearly paid 1% to borrow the net. Uh what You have to be careful though because the liquidity mining incentives are taxable. So then the actually what you keep might not be uh what it looks like. Um actually here you when you look at USDT, this is the one where the the net is more is the highest, so you can make nearly 5% by borrowing.

So usually I often borrow in USDT also because it's kind of the riskiest of the stable coins there, so you know it's actually may maybe it's better to borrow with risky to borrow risky assets that might not work. Yeah, if they go down if they lose peg to to the downside, that's right. Yeah. Yeah, I've done the same thing on Ave currently. Sweet. Okay. So so yeah, so now the fridge is $500, so I'm going to borrow 500 USDT.

Okay, so when I when you borrow like that oh 500 USDT. So then it's saying my health factor is 1.82. So what does it mean a health factor of 1.82? It means that my collateral value can lose 82 uh it can lose 82 out of 1.82. So nearly 50% uh and and so my borrower position would be fine. So that's quite a risky borrowing. So this kind of level of borrowing I would only recommend for people that are really connected and that can access their computer really soon. Actually, if you're going to take this kind of risk

uh what you need and even if you're going to borrow on Ave, what you need is to use Hal XYZ, which helps you to track your health factor and sends you email or Telegram updates whenever it reaches a certain level. So so that's quite important. Yeah, we'll be using that right after this call. Thank you. Okay, yeah, you you didn't know didn't know the Hal yet. I I didn't. Andy, were you aware of uh the no- notifications for health factor? Yeah, I was using it on Compound back in 2020 back back when we were whales prior to Bloody Wednesday. So these days I don't need it.

Yeah, so since you have like a lot of options email, Twitter or did email, but it gets kind of spammy like it sends you every every few hours. You got to set it right. Yeah. That's awesome. So that's a great tool. You know, actually, you know, a more My risk appetite when I borrow, I would say it I would borrow more aiming for 2.5 health factor. And actually, the higher the risk the the higher the health factor, the safer your borrowing. So, you know, like we've seen in the past the markets crash 90%. If you want to be able to handle a 90% crash, that means the value divided by

10, it means you need to have a 10 health factor. So, then, you know, everyone has their own risk appetites and and risk tolerance. Sweet. Cool. So, yeah, I think a solid recommendation above 2.5 is great, variable only on Polygon, and here we are. So now I'm doing this borrow. And all during this process, you're still getting paid for your MATIC, still generating those rewards.

Yeah, exactly. And so people often talk about the capital inefficiency of liquidity protocols, but that's the thing. I mean, where is the inefficiency here? Your your collateral is gaining 8%. Your borrows are gaining 5%. It's kind of yield on yield. So, if anything, you know, I would say it's ultra efficient. Awesome. Okay. So, this is a position where we're longing MATIC. Nice.

Right. And then you can use that USDT to go buy a new fridge. Or you can use it to buy more MATIC. Or you can use it and put it elsewhere. You can put it into Curve on Polygon. You can put it So, yeah, all of a sudden you have this 350 USDT which now you can go ahead and turn that into a further productive asset. Yeah, so I think a good example here is curve. Yeah definitely. Yeah, exactly. And so curve polygon is using also the it was got a pool of eight tokens as well. So, the advantages of that is that the yields are stacking on top of each other.

And so with the yeah, with with polygon right now if you provide liquidity, you're receiving about 3% and then 3% from from the trading and then 20% W matic rewards. That's great. Awesome. Wow, they killed the API. It was at 40% a few weeks ago. Yeah. We we were telling too many people about it. I mean, when I started looking at this there was like maybe less than 1 million in the in the polygon curve.

Yeah. But now there's nearly 1 billion, so it's it's grown well. So, there is guys a safe way to use Ave and to deposit any sort of crypto asset. We did the matic token in this case, you know, borrow stable coin, bring it over to to to curve and earn more yield on top of the yield that you're already paying for borrowing. And the main risk here is that it is the third risk which Alex brought up which is the market risk. Making sure that the matic token doesn't just fall to shreds. But at the current at the current price, you know, we've got about a 60% decline until we even think about any sort of liquidation risk. So, you know, I would consider that to be fairly safe.

And yeah, that is a a good safe way to establish a a bullish position on Ave. Yeah. Yeah, guys. And and just to keep in mind, you know, when when you're tracking that market risk and and managing your positions. Your deposits, those are your long positions. So right now, like Andy said, we're long MATIC in the strategy, and your borrows are your debt, and that's your short position. Um which, again, is why most people um will borrow stablecoins to keep, you know, their their debt manageable and and um it's easy to keep track of.

Yeah. So Yeah, so so now let's let's just say just as a scenario that like last week actually the price of MATIC does drop. Uh and that it drops to the point, you know, let's let's just say here I'm going to withdraw 350. And in fact, I've not withdrawn in fact, oh well, that's not enough. Wait. So So I withdraw 400. So now my health factor is at 121. And so basically that's that's tricky. I mean, you guys it doesn't scare you because you're total degens, but Oh, I'll tell you it's scary.

No, that's pretty scary right there. Yeah. Yeah, so your so your health factor after withdrawing that um goes down to about 1.21. Um And then the next thing you would want to do is probably repay some of your debt right? Exactly. So so now that the options you have to do, so either if you have more funds, you can add some collateral. But actually, for example, MATIC I think the borrowing power of MATIC is just 50% 50%. So basically, if you add MATIC if you add collateral, for each $1 you only gain 50% of

borrowing power. So in case of really extreme event, I would rather recommend repaying the borrow. It's It's It's a It's a more efficient way to augment the risk factor. So so yeah. Oops. Uh so sorry. Yeah, just when we need the transactions to happen fast, they're slow. Yeah, that's slow. So so yeah. So basically here you're going to So I My health factor is at 1.21. So yeah, I would recommend repaying.

And then here you repay. New health factor 3 million. That's a safe health factor. Because basically because there has been 1.00137 accrued interest in the last few minutes, and I don't have the funds to repay all of it. Yep. She had to You had to pay it off and and then you're there. Right. And then you only have, you know, about a hundredth of a cent or so remaining to repay, and that was the interest that you accrued in the last few minutes, like you said.

And yeah, that's a That is a safe way to use Aave, guys, and establish a position to go long on on the market. You can go short by kind of flip-flopping this. So you can deposit USDT or or well, actually in this case USDC or DAI because USDT is not used as collateral, and then you can borrow, you know, you can borrow ETH or Matic and sell it back to stables, and then you've established a short position. Generally speaking, either position works, obviously, in the independent on the market conditions, and keep the health factors, you know, up there by 2 and 1/2 or so.

And yeah, I mean, I I I say Aave is are pretty safe place if you will. You know, like most users aren't levered up to the tilt. And yeah, any closing thoughts guys Alex on kind of using Ave in a safe way. Any kind of pointers for anybody who's who's still watching to kind of get started to make sure that they're staying safe. Yeah, for sure. Well, I think you know, as mentioned but so really start with experimenting a bit with the Ave polygon markets which is very cheap and you can kind of try different strategies on a small scale and they'll still be worth it. And and then you know do use good risk management and do use

like the how XYZ because it's it's not difficult not to get liquidated like you know, actually you know there's been a hectic May but that that's been preceded with you know, a few months of you know, heavy farming where where it's it was quite profitable. So just take your precautions. Don't maximize your profits. Make sure you you minimize your risks first and then you can really use Ave freely and it can really open a lot of new opportunities if you need capital under quick time constraints. It's really practical to have that available at all times.

Awesome. Awesome. Thank you Alex for coming on. This this you know, I've used Ave a couple times a few times but talking you know, with someone as experienced as yourself definitely helps me gain a better understanding. Yeah sweet. A lot of a lot of this. Yeah, sweet. Alrighty Alex, well thanks for coming on. Thanks for showing us how to use Ave. I'm sure folks will be eager to use it after this. And yeah. Thanks guys. Yeah, hope hope some people try Ave and try it safely.

We will post links in the description, guys. Peace out.