One of the best ways to generate yield on your digital assets is to supply liquidity to DeFi protocols. Protocols such as Aave generally have two types of user groups.
Suppliers - Users who provide liquidity to the pool
Borrowers - Users who borrow liquidity from the pool
The rates are algorithmically determined depending on the amount of funds in the pool. Historically the most liquidity on DeFi protocols has been on the Ethereum network. However due to the increase of transactions on the Ethereum network we have seen an explosion in gas fees.
With these gas fees soaring from $100US to over $300 or more depending on the transaction normal users get priced out of the market. This goes against the ethos of DeFi which is financial inclusion for everyone. Luckily new protocols with lower transaction fees and higher throughput that are EVM compatible are arising. The rest of this post will focus on one of those new networks Avalanche.
To deposit assets into Aave with Avalanche the safest way is to use a hardware wallet and for this example I used a ledger. First, go and install the avalanche app from the Ledger Manager. With Metamask you will need to connect to the avalanche c-chain. You can learn how to do that here https://coinguides.org/metamask-avalanche/.
Once you have metamask configured with your ledger or hardware wallet you can connect it to metamask via "connect hardware wallet". You should now be able to head over to the avalanche wallet and connect through the ledger.
You should be able to connect to your wallet by clicking “Access Wallet” and then connect via ledger.
And then if successful, you should see your Avalanche wallet. Make sure you are transacting on the “Avalanche C-Chain” circled in red as will will be using that address later to interact with the network.
Ok so now that you have properly setup your avalanche wallet, it’s time to get funds.
Ultimately it’s up to you on how you get funds, you can either get them from a centralized exchange like coinbase or kraken. Once you get the AVAX in your wallet from the exchange(MAKE SURE IT IS C-Chain), you can transfer from to your ledger wallet. See the image above on the avalanche wallet the c-chain address for transfer. Once it is in your wallet you should now see these values on the avalanche wallet page when you connect your ledger.
Now that you have the AVAX in your wallet, I generally like to provide liquidity into Aave with stablecoins(optional). If you want to supply AVAX you can skip this step and head to Aave directly. For swapping assets on Avalanche I use paraswap(Dex Aggregator) which usually gets the best prices across various decentralized exchanges. I swap the AVAX into a stablecoin such as USDC.e or DAI.e.
Now that you now have the stablecoins in your wallet, head over to Aave. Select the Avalanche market, enter app and click to deposit. You now earn interest on the stablecoins you deposited + the liquidity mining rewards in Avalanche.