Are you AAVEing a laugh?

AAVE seemed to have a bright future and I liked the idea of its lending system. I picked up some AAVE on Kraken exchange not too far from its eventual top. I decided to experiment with staking and deposits and for this I needed to move off Kraken into AAVE land proper.

There was a small cost moving from Kraken to an AAVE wallet: 0.0119 AAVE taken by Kraken per withdrawal. I created a wallet using Metamask on my Android phone and the AAVE from Kraken arrived pretty fast.

An AAVE wallet is not much use by itself. You need to link it to the web AAVE app. I did that through the Metamask browser and was ready to review the various options. I think it took less than 10 minutes to have AAVE off the exchange and into a wallet that app.aave.com could see.

Sadly, this is where it began to get expensive. AAVE runs on top of the Ethereum blockchain and transactions are subject to ETH network fees. The AAVE design requires a number of transactions and each has a network fee. I do not recall reading the extensive list of actions points with fees and I was about to be educated fast and hard.

I tackled staking first. AAVE is paid out to stakers at a fixed rate of around 6% APR and it has two downsides. The first is that your AAVE is locked away and you need to request the stake to be unlocked which takes 10 days and there is an associated network fee which at the time was about USD 23. The second downside is that up to 30% of the staked pool is used to compensate if there is a “shortfall event”. You earn an incentive with the possibility of contributing to pay-outs if there is a funding issue.

I liked staking as an idea because I could park some AAVE in the staking system and collect a set rate while supporting AAVE in case there was one of these events.

This is where the first of the Ethereum network fees was required: moving 1 AAVE from my wallet to the staking pool. Some of the AAVE operations need an additional one-time approval transaction and this was the first. The network fee for the approval was the equivalent of USD 11 and after that I needed the proper staking transaction which cost USD 85 in network fees.

My 1 AAVE had a value of USD ~440 at the time so I effectively needed to spend 20% of that again to transfer from my AAVE wallet to the staking pool. Ok, well this is an education right? So I staked my 1 AAVE after buying some ETH to complete the transactions.

I still had 4-ish AAVE in my AAVE wallet and for this I wanted to review the deposit system. AAVE deposits bear no interest but you can swap AAVE to different tokens such as DAI and USDT and those can pay considerable interest. First I had to transfer AAVE from my wallet to the AAVE deposit system which required a one-time approval with network fee — USD 11 equivalent — and the actual deposit transaction which was another USD 69 in network fees. I needed more ETH for this so I bought it and transferred it from Kraken to my ETH wallet in Metamask and deposited my AAVE.

I considered swapping my AAVE to DAI and USDT and here is where the ETH cost went crazy: I was casually quoted USD 350 to 400 for network fees on top of the 0.2% fee taken from the AAVE being swapped.

I was not impressed! For me this was an insane cost simply to convert from AAVE to this or that other token. The swap operation takes 0.2% of your AAVE anyway but on top of that I was being asked to spend almost as much as 1 AAVE purely on a fee that did not benefit me nor AAVE nor the tokens I was looking to swap to. This USD 350–400 charge was simply ETH to make the swap happen.

This network fee size was not uncommon. I checked a deposit with my tiny remaining 0.00097 ETH balance (about USD 1.68) and was asked to pay a USD 202 network fee. I did not continue with that.

Not cheap