What Is UwU Lend (UWU)? Complete Guide & Review About UwU Lend

What Is UwU Lend (UWU)?

UwU Lend is a liquidity market that offers depositing and borrowing. Users earn interest on deposits and pay interest to borrow. This provides the ability to free capital against assets users are planning to hold for utilization in other investments, leveraging, or expenses. Outstanding loans have more collateral backing them than debt, known as overcollateralization.

This eliminates risk of non-payment for depositors. The UwU treasury earns a small amount of fees to cover bad debt in the event of extreme volatility. Borrowers do not have a repayment schedule with no limit on loan duration. UwU Lend is non-custodial; no user funds can be seized by the protocol.

How to Use UwU Lend

Connect to UwU Lend

Connect your wallet using the button in the top right corner. Multiple wallets are supported. If you do not have a wallet, you can go to install the popular MetaMask wallet on desktop. It will add a browser extension to connect to UwU Lend and other DeFi apps. The mobile version contains a built in browser inside the app. Your wallet must connect on the Ethereum network where the app resides to interact with UwU Lend.

Depositing into UwU Lend

Go to the Deposit section and select the asset you want to deposit. You will need to approve UwU Lend to access the asset you want to deposit if you have not done so before. Now you can deposit into UwU Lend and immediately begin earning interest based on protocol and borrowing demand. All deposits are approved collateral to take out loans if desired. Interest earned by deposits auto compounds the position with no need to harvest or claim rewards.

Some assets may have a deposit or borrow cap to keep UwU Lend’s exposure to volatility healthy.

Withdrawing

To withdraw simply go to the Deposit section and press “Withdraw.” Determine the amount to withdraw and submit.

Borrowing

If you have an asset deposited you can borrow against it. Select Borrow from the dashboard and press “Borrow” for the asset you want to borrow. You can see the variable interest payment required to borrow from here. Set the amount you want to borrow against your available deposit(s). The most liquid assets such as LUSD and DAI allow you to borrow up to 90% LTV (loan to value).

Liquidation

Liquidation may occur if the value of the assets borrowed reach the value of the collateral deposited. This may happen in the event of collateral reducing in value, the borrowed asset gaining value, or both. Borrowers may see the health factor of their loan on the “Borrow” page. Higher health factors are at less risk.

How to Deposit

Go to the Deposit section and select the asset you want to deposit. You will need to approve UwU Lend to access the asset you want to deposit if you have not done so before. Now you can deposit into UwU Lend and immediately begin earning interest based on protocol and borrowing demand.

Depositors will receive uTokens, for example uwETH, as a receipt for depositing. These tokens are redeemable for an ever increasing amount of underlying tokens according to deposit yields. That is, 1 uDAI may be redeemable for 1 DAI on day 1 of the protocol and 1.1 DAI after a year assuming a 10% deposit interest rate. Using them elsewhere or sending them to another address will lose access to the deposit.

Earning Interest

Deposits earn variable interest. This is based on the demand to borrow the asset supplied and a small flash loan fee of 0.09% received when borrowers flash loan to repay into the given asset. The current interest rate shown in APY (annual percentage yield) can be seen for any asset on the dashboard. It indicates the average yield over the previous 30 day period extrapolated to a yearly estimated return.

Deposit Limits

There is typically no upper or lower limit on deposits. Transacting on the Ethereum chain can be expensive. Deposits where the fee to transact is a large chunk of the total capital may be inadvisable. Some volatile assets may have a deposit or borrow cap to limit UwU Lend’s exposure to potential bad debt.

Why Borrow?

Users may choose to borrow if they want to hold an asset because they believe in its growth potential. Borrowing against it frees capital to invest in other protocols, leverage positions or pay expenses while keeping exposure to potential upside.

How to Borrow

You need an asset deposited to borrow against. Select Borrow from the dashboard and press “Borrow” for the asset you want to borrow. You can see the interest payment required to borrow from here. Note that interest rates on loans are variable. If a high percentage of the asset you are borrowing is lent out the rate will increase. Set the amount you want to borrow against your available deposit(s).

Borrow Allowance

The borrowable amount depends on your collateral value, available liquidity of the asset you are trying to borrow, and the LTV of your collateral. If your collateral has a 50% LTV that means you can borrow against half of its value so long as enough assets are available to borrow. Each asset has its own loan parameters in the “Accepted Collateral” section.

Loan Repayment

Loans are repaid in the asset borrowed. Borrowing wBTC against wETH will require wBTC to be repaid with any interest accrual to free all your collateral for withdrawal. Users may also opt to sell a portion of their collateral to repay their loan via a flash loan. In this example the amount of wETH needed to cover the loan will be sold into wBTC to clear the debt. All of this happens behind the scenes but may incur high slippage for low liquidity assets, extremely volatile markets, or large positions. There is a 0.09% fee for flash loans.

Why Uwu Lend?

UwU Lend has evolved from AAVE, the largest lending and borrowing market on Ethereum. AAVE’s contracts have been thoroughly audited and battle tested so users can have confidence in using UwU Lend. The protocol has no DAO or governance friction of any kind. Protocol earnings are paid directly to stakers in the form of a basket of assets the protocol supports.