Modulis 3 · DeFi lending

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Aave.com — borrowing on the Ethereum network

ETH Aave

Aave is the largest DeFi borrowing platform in the world. People have trusted it with more than $15B. It's been running since 2020 and is the most battle-tested protocol in all of DeFi.

In our strategies, Aave is a backup platform — if something happened to Solana, Aave keeps running independently.

Once you understand Aave, you can build a position on two independent networks at once — no longer hostage to a single ecosystem, but someone who chooses where and when to act.

Why do you need both Kamino AND Aave?

Don't put all your eggs in one basket

Imagine you have two bank accounts. If one bank goes down, the other still works. Same with DeFi: if the Solana network runs into trouble, Aave on Ethereum keeps running on its own.

Reason	Explanation
Backup	If Solana goes down — Aave keeps running
A different asset	ETH moves differently than SOL
More liquidity	Aave TVL $15B+ (7x more than Kamino)
Longer track record	Running since 2020 — the most battle-tested
E-Mode	A special mode with a higher LTV

Diversification

Never concentrate everything in one place. If 70% sits on Kamino and 30% on Aave — even if one platform runs into problems, the other portion stays safe.

Why Arbitrum, not Ethereum?

ETH Aave runs on several networks. We use Arbitrum — Ethereum's "fast lane".

Arbitrum analogy

Ethereum mainnet is like a highway: usually clear and cheap, but during rush hour the toll can jump several times over. Arbitrum is a separate tunnel to the same destination, where the price barely changes no matter what's happening on the highway.

Fee comparison

Action	Ethereum mainnet	Arbitrum
Deposit ETH	~$0.03–0.30	~$0.01–0.05
Borrow USDC	~$0.03–0.30	~$0.01–0.05
Repay debt	~$0.03–0.30	~$0.01–0.05
An active week	~$0.20–1.50	a few cents

Why Arbitrum, then?

After the 2024 "Dencun" upgrade, Ethereum mainnet fees dropped to cents — cost is no longer a barrier. The difference lies elsewhere: mainnet fees move with network load and can briefly spike many times over during congestion, while Arbitrum's stay small and predictable at all times. That's more convenient for the regular actions a strategy requires. Before a larger operation on mainnet, check the current price at etherscan.io/gastracker.

How do you get onto Arbitrum?

Hold ETH in your MetaMask wallet

The ETH needs to be on the Ethereum network in your MetaMask wallet.

Move ETH to Arbitrum via a bridge

Go to bridge.arbitrum.io. Move ETH from Ethereum to Arbitrum. Takes 10–15 minutes.

The bridge transaction costs an Ethereum mainnet fee — usually ~$0.03–0.30, more during congestion.

Add the Arbitrum network to MetaMask

MetaMask → Settings → Networks → Add Network → Arbitrum One. Or once you connect to Aave, MetaMask will offer to add it automatically.

Connect to Aave on Arbitrum

Go to app.aave.com. Select the 'Arbitrum' network at the top. Connect with MetaMask.

ETH collateral on Aave — step by step

Connect to app.aave.com with MetaMask

Select the Arbitrum network. You'll see all markets with their interest rates.

Deposit ETH as collateral

Click 'Supply' on ETH or WETH. Enter the amount. Confirm in your MetaMask wallet.

Aave uses WETH (Wrapped ETH — a technical wrapper; the conversion happens automatically).

Turn on collateral mode

Toggle the 'Collateral' switch on ETH — this lets it be used as collateral.

Borrow USDC

Click 'Borrow' on USDC. The rate will be Variable — Aave V3 doesn't offer another option anymore. Watch your Health Factor.

Health Factor needs to stay above 1.5. If it drops below 1.0 — liquidation.

Monitor your position

The dashboard shows Net Worth, Health Factor, and your positions. Check it daily.

E-Mode — a special mode

Aave has a unique mode — E-Mode (efficiency mode). It lets you get a higher LTV when you borrow and post similar-type assets as collateral.

E-Mode analogy

It's like a bank saying: "If you want a euro loan and post euro bonds as collateral, I can lend you more, because both assets are very similar and barely move relative to each other."

Parameter	Normal mode	E-Mode
Collateral	ETH	stETH (staked ETH)
Debt	USDC (different class)	WETH (same class)
Max LTV	80%	93%
Liquidation penalty	5%	1%

E-Mode isn't used in our main strategies — we borrow USDC (a different asset class). But it's useful to know.

Kamino vs Aave — comparison

	Kamino (Solana)	Aave (Arbitrum)
Network	Solana	Ethereum (Arbitrum)
Main asset	SOL	ETH
Speed	~0.4 seconds	~2 seconds
Fees	~$0.01	~$0.01–0.05
Trust (TVL)	$2B+	$15B+
Running since	2023	2020
Collateral yield	~6% (SOL)	~2–3% (ETH)
USDC borrow cost	~5–7%	~5–7%
USDY support	Yes	No
Wallet	Jupiter Wallet	MetaMask
Network stability	Occasionally goes down	Very stable

Recommendation

Main position: Kamino — higher SOL yield, cheaper fees
Backup position: Aave — greater trust, more stable network
For an ETH position: Aave — the only place for ETH in our strategies
Split: 70% Kamino + 30% Aave

Variable vs Stable Rate — which to choose?

Mode	Variable	Stable (fixed)
Interest	Changes every minute	Was temporarily fixed
APR	~5–7%	historically ~8–10%
Available on Aave V3	Yes	No — disabled since 2023

Choose Variable Rate — in practice it's the only option: Aave V3 disabled Stable-rate borrowing across all markets in 2023, so you won't even see it in the interface. And back when it did work, over the long run it tended to be more expensive than the variable rate.

Bonus: AAVE token rewards

Using Aave, you occasionally earn extra AAVE tokens as a reward (depends on active programs). This can lower your effective borrowing cost — the amount varies and isn't always guaranteed:

USDC borrow cost: ~5–7%
AAVE reward (if active): can reduce it by a few percentage points
Check the actual cost on the Aave dashboard → "Net APR"

Aave risks — and how you manage each one

✅ AUDITED Aave has 10+ independent security audits. Every risk here has a concrete lever — you don't fear it, you know how to keep it in the green zone.

Risk	Level	How to manage
Smart contract bug	Very low	10+ audits, running since 2020
Price feed error	Very low	Chainlink — the industry standard
Liquidation	Managed	Keep Health Factor > 1.5
Arbitrum bridge risk	Low	7-day protection period
Interest rate spike	Medium	Monitor and refinance if > 10%

In short

Aave — the largest DeFi borrowing platform ($15B+)
We use Arbitrum — fees stay small and predictable even when mainnet congestion pushes prices up
ETH collateral earns ~2–3% a year
E-Mode allows a higher LTV for similar assets
Aave is a backup platform — protection if Solana goes down
Split: 70% Kamino + 30% Aave
Health Factor > 1.5 = a safe position
Aave V3's borrow rate is Variable only (Stable rate has been disabled since 2023)

Quick check

Why does our strategy use Aave on Arbitrum instead of Ethereum mainnet?

Practice task

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Explore the Aave market on Arbitrum

Now compare the two platforms yourself: open Aave and find the same numbers you saw in the Kamino lesson. Takes about 10 minutes, no wallet needed.

Just exploring — you're not depositing, borrowing, or confirming any transactions. Double-check that the domain really is app.aave.com — fake sites with similar addresses are a common scam.

This is learning, not investing — use only small amounts you treat as tuition.

You just read the Aave market on Arbitrum yourself and compared it with Kamino — now you can choose a platform based on numbers, not gut feeling.

Kamino.com (SOL)Borrowing strategy and looping