Lesson 13: DAI / ETH deposit() into and borrow() from Aave

[ManuWeb3]

Hi all,

After depositing 0.02 ETH equivalent wei amount into Aave and getting the following data through await lendingPool.getUserAccountData(account), I don't understand from where are we getting 16500000000000000 value that's available to borrow ??

It seems 82.50% of what we deposit but I'm not able to find such a % on Aave docs - Risk parameters section. It says below:

[othaime-en]

Hey @ManuWeb3 good question. This was actually bugging me for a while, I still haven't gotten the hang of it yet. But is came across this article and it might help you understand a little bit what is happening here.
It has a section that reads
"Each asset on Aave has a liquidation threshold: the point at which the value of your borrowed assets overpowers the value of your collateral. At this point, the loan is now considered under-collateralized and you will get liquidated. The liquidation threshold in Aave for ETH as collateral is 82.5%. This means that if the value of your borrowed assets gets to be 82.5% of the total value of your collateralized ETH, that collateral gets liquidated. To be liquidated means your assets are sold off."
Be sure to check it out. I'm still figuring my way through the aave docs they're abit foggy but if I come across anything new and insightful I'll notify you.
In the meantime, notify me if this answers your question.

[ManuWeb3]

Thanks @othaime-en for posting this article and notifying should you come across more insights on this.

I'm yet to go through it completely, which I definitely will, soon, to have an even deeper understanding of Aave, but just read the part you posted.
The article does say 82.5% but it conflicts with 80% value posted on Aave docs.

And, definitely, I'll update this post should I come across any further clarity on this.

[ManuWeb3]

Probably @PatrickAlphaC can shed more light here if he gets chance.

[othaime-en]

Glad I helped provide some clarity in this matter. Please share any future findings with us.

[othaime-en]

Probably @PatrickAlphaC can shed more light here if he gets chance.

Yeah definitely

[ManuWeb3]

Glad I helped provide some clarity in this matter. Please share any future findings with us.

Absolutely.

[krakxn]

[ManuWeb3]

Thanks @krakxn for posting this but I could hardly make anything out of it as I'm reading all these financial / mathematical terms for the first time.

Could you please post any description of these terms ?
Or post the weblink where you came across this picture?

[krakxn]

https://docs.aave.com/risk/liquidity-risk/borrow-interest-rate has everything you are looking for.

[ManuWeb3]

Got it, thanks

[ManuWeb3]

@othaime-en @krakxn ...

A quick question in the similar context:

If LTV is defined as the maximum amount that can be borrowed against a collateral, then how come a borrower will ever be able to borrow more than LTV and may end up getting undercollteralized and liquidated ?

In case of DAI, if LTV is 75%, then how come one will ever reach Threshold Limit of borrowing: 80% ?
Or even borrow more than 80% and get liquidated ??

[krakxn]

"how come a borrower will ever be able to borrow more than LTV" That's the point, the borrower cannot borrow more than LTV.

See, against a specific collateral you can only borrow upto a certain threshold, you cannot borrow more than that. And if you increase your collateral to be overcollateralized, the threshold will then increase too, as you are putting more for collateral and hence less risk for liquidation. Likewise, if you decrease your collateral, you will be undercollateralized, and hence that threshold will decrease too, which will lead to more risk and liquidation once met.

[othaime-en]

^
All of the above. Also remember that the more you collateral/asset stays in the protocol you earn interest on it so overtime, that is another way your collateral can increase and with it, the LTV amount.

[alymurtazamemon]

@ManuWeb3 Hey! as you deposited 0.02 ETH to Aave, it gives you that amount of weth you can borrow.

[ManuWeb3]

Hi @alymurtazamemon ... Can we deposit ETH to Aave directly ?
Or you meant to say through WETHGateway ??

[alymurtazamemon]

@ManuWeb3 we do deposit ETH directly.

[ManuWeb3]

Ohk... because I understood that we can only deposit ERC20s directly and the native Blockchain tokens have to be deposited (wrapped / unwrapped) through WETHGateway.sol.
Did I misinterpret something ?

[ManuWeb3]

@ManuWeb3 we do deposit ETH directly.

Hey @alymurtazamemon , can you please elaborate ?