Your first step is to set up a self-custody wallet that supports the blockchain(s) you plan to use. Popular options include: • **MetaMask**: Most widely supported, works with Ethereum and EVM-compatible chains • **Phantom**: Best for Solana-based lending • **Solflare**: Alternative for Solana DeFi • **Keplr**: For Cosmos ecosystem lending After installing your wallet: 1. **Write down your seed phrase** on paper (never digitally) and store it securely 2. **Create a separate lending/borrowing wallet** from your main holdings for better risk management 3. **Connect to a blockchain explorer** like Etherscan or Solscan to verify all transactions 4. **Add the networks** you plan to use (for MetaMask, you'll need to add chains like Polygon, Arbitrum, etc.)

Fund your wallet with the assets you plan to lend or use as collateral: 1. **For beginner lenders**: Start with stablecoins like USDC, USDT, or DAI as they provide predictable yields without price volatility 2. **For borrowers**: Acquire the assets you intend to use as collateral, ideally blue-chip assets with high collateral factors 3. **Acquisition methods**: • Purchase directly through exchanges like Coinbase, Binance, or Kraken and withdraw to your wallet • Use on-ramp services integrated with wallets like Moonpay or Transak • For cross-chain assets, use bridges like Synapse, Across, or Stargate 4. **Start small**: Begin with a modest amount while you're learning the platforms

Select a lending protocol based on your specific requirements: **For Beginners (Recommended)**: • **Aave on Ethereum** or **Polygon**: Most established, user-friendly, and well-audited • **Compound on Base**: Lower fees than Ethereum with a simple interface **For Multi-Chain Users**: • **Aave**: Available on 7+ chains with unified interface • **Solend**: If you're specifically interested in Solana **For Best User Experience**: • **Spark Protocol**: Fork of Aave with streamlined interface • **MIM Infinity**: Simplified borrowing experience **Selection Criteria**: • Protocol security and track record • Available assets for lending/borrowing • Interest rates offered compared to alternatives • User interface simplicity • Liquidation parameters and collateral factors

Now it's time to connect to your chosen lending platform: 1. **Visit the official website** of your selected protocol • Aave: app.aave.com • Compound: app.compound.finance • Solend: solend.fi 2. **Verify the URL carefully** to avoid phishing sites 3. **Connect your wallet** using the connect button (typically in the top right) 4. **Review the dashboard** to understand: • Available markets and assets • Current interest rates for lending and borrowing • Your borrowing power based on deposited collateral • Health factor indicators 5. **Check gas fees** (for EVM chains) or transaction costs before proceeding 6. **Consider setting up a test transaction** with a small amount first

Making your first deposit is straightforward: 1. **Navigate to the Supply/Deposit section** in the protocol interface 2. **Select the asset** you wish to deposit 3. **Enter the amount** or use the max button if depositing all holdings 4. **Review important details**: • The expected APY (annual percentage yield) • Whether the asset can be used as collateral • Any supply caps or limitations 5. **Approve the token** (first-time use of an asset requires an approval transaction) 6. **Confirm the deposit transaction** in your wallet 7. **Verify receipt of deposit tokens** (like aTokens in Aave or cTokens in Compound) which represent your position 8. **Monitor your position** after depositing to ensure everything appears correctly Your deposit will immediately begin earning interest, which accrues continuously.

After depositing, understand these critical metrics: **1. Health Factor** • The most important safety metric for borrowers • Represents the ratio of your collateral value to borrowed value (adjusted by liquidation thresholds) • Higher is safer - aim to keep above 1.5 at minimum • Below 1.0 triggers liquidation **2. Loan-to-Value Ratio (LTV)** • The percentage of your collateral value you've borrowed • Lower percentages are safer (less risk of liquidation) **3. Borrowing Power** • The maximum amount you can borrow against your current collateral • Updates dynamically as collateral values change **4. Liquidation Threshold** • The collateral ratio at which your position becomes eligible for liquidation • Different assets have different thresholds based on their risk profiles **5. Current APY** • Your earning rate on supplied assets • Can be variable based on market conditions

If you want to borrow against your collateral: 1. **Ensure your deposited assets are enabled as collateral** • This is usually a toggle option in the UI • Some assets cannot be used as collateral 2. **Navigate to the Borrow section** of the platform 3. **Select an asset to borrow** • Stablecoins are recommended for beginners to avoid additional price risk 4. **Determine a safe borrowing amount** • Conservative approach: Borrow less than 30% of your maximum borrowing capacity • Moderate approach: Stay below 50% of your maximum • Never borrow the maximum allowed amount 5. **Choose between stable and variable interest rates** (if available) • Variable: Generally lower initially but can fluctuate • Stable: Higher but predictable for budgeting purposes 6. **Confirm the transaction** in your wallet 7. **Immediately check your Health Factor** after borrowing • Set up a plan to monitor this regularly • Consider setting up alerts for when it drops below your comfort threshold

Proper position management is crucial for DeFi lending success: **Regular Monitoring** • Check your positions at least weekly • Pay closer attention during market volatility • Use portfolio trackers like Zapper, DeBank, or Zerion for a unified view **Managing Liquidation Risk** • Set up price alerts for collateral assets • Have a plan for adding collateral or repaying loans if markets drop • Maintain a buffer beyond the minimum health factor **Interest Rate Management** • Switch between variable and stable rates when advantageous • Consider refinancing loans between protocols if better rates become available **Tax Considerations** • Keep records of all lending and borrowing activities • Track interest earned and paid for tax reporting • Consider using tracking tools like Koinly, CoinTracker, or TaxBit **Exit Strategy** • Know how to efficiently unwind positions when needed • Understand the optimal order of operations (typically repay loans before withdrawing collateral)