Earning with Kava Lend
Learn more about Kava Lend and some basic strategies for maximizing earnings.
Kava (kava.io) is a secure, lightning-fast Layer-1 blockchain that combines the developer power of Ethereum with the speed and interoperability of Cosmos in a single, scalable network.
Kava Lend is a decentralized money market that allows you to lend assets that could be borrowed by other users or vice-versus.
Users who supply an asset as collateral will earn interest as borrowers pay interest back to the suppliers. Suppliers also receive $KAVA and $HARD rewards.
Lending Assets to Earn Interest and Rewards
Certain assets like USDX and ATOM also receive KAVA rewards. Suppliers also receive a portion of interest collected from borrowers.
Simply supplying assets to Lend is one of the easiest and safest ways to earn with crypto, as you’re not at risk of impermanent loss, and there’s no need to provide an asset pair, compared to DEXs like Pancake Swap, Osmosis, and Kava Swap.
Borrowing Assets and Managing Your Position
To borrow on Kava Lend, users must first supply assets as collateral.
All collateral assets have a loan-to-value ratio of 50% except for USDX, which has a loan-to-value ratio of 25%.
Collateral on Lend is managed as a single lump sum position, so supplying multiple collateral assets can help stabilize your leverage should you choose to borrow against your supplied collateral. With a diverse set of collateral assets, the other assets can help maintain your overall collateral value if one asset price falls.
Borrow Limit Ratio and Liquidation Mechanics
Based on your collateral, the borrow limit ratio will display the maximum amount you can borrow and compare that to the amount you are currently borrowing.
Both sides of this ratio can change based on the price of your collateral and the price of your assets borrowed.
When borrowing assets on Lend, it’s recommended to over-collateralize your loan, meaning you maintain a borrow limit ratio of 50% or less.
When liquidated, a portion of your supplied assets is sold off at auction to reclaim the difference in the value of borrowed vs. collateral assets plus a 7.5% liquidation penalty.
To learn more about liquidation on Kava Mint and Lend, click here.
Basic Earning Strategies with Lend
The risk level when supplying to Kava Lend is very low. Users are not subject to any impermanent loss and maintain 100% ownership of their assets.
By supplying, users earn more of the asset they supply based on interest fees paid by borrowers and earn HARD token rewards.
The risk Level for leveraging assets in Kava Lend is moderate depending on the amount borrowed compared to the collateral supplied.
A solid strategy for Kava Lend is to supply multiple blue-chip assets such as ATOM, BTCB, and BNB, then borrow Kava’s stablecoin, USDX.
Shorting an Asset
The risk level with shorting assets on Kava Lend is high since you’re leveraging your assets to try and time the market.
The risk is that if the price of the asset goes up instead of down, it’ll cost more to swap back for your borrowed asset and as the price of that borrowed asset raises, it can push the borrowed amount side of the borrow limit ratio. Using a declining asset as collateral while borrowing a raising asset creates the greatest liquidation risk.
There are Many Ways to Earn with Kava Lend.
This article reviewed Kava Lend, how to borrow assets and manage your position, and the Borrow Limit Ratio and Liquidation Mechanics. You then learned about a few basic strategies to earn with Lend.
Disclaimer: This content is provided for informational purposes only and should not be relied upon as legal, business, investment, or tax advice. You should consult your advisers as to those matters.