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Integrating AAVE Protocol with other DeFi Protocols

Yasin Cakal

As a blockchain developer, it is important to understand how to integrate different protocols and platforms to create powerful decentralized finance (DeFi) applications. In this lesson, we will explore how to integrate the AAVE protocol with other popular DeFi protocols such as Compound and Uniswap.

Use Cases for Integrating AAVE and Compound

One potential use case for integrating AAVE and Compound is to create a decentralized lending platform that allows users to borrow and lend a variety of assets. By using AAVE’s variable rate model and Compound’s algorithmic interest rates, users can take advantage of the best lending and borrowing rates on the market.

Another potential use case is to create a DeFi yield farming platform that allows users to earn returns by staking and lending their assets on AAVE and Compound. By combining the two protocols, users can earn higher returns on their staked assets and have more flexibility in terms of the assets they can earn yields on.

Integrating AAVE and Uniswap

Uniswap is a popular decentralized exchange protocol that allows users to trade a variety of ERC20 tokens. By integrating AAVE and Uniswap, developers can create DeFi applications that allow users to trade and lend assets on a single platform.

For example, a developer could create a DeFi platform that allows users to trade AAVE’s aToken assets, which are ERC20 tokens that represent a borrower’s debt position on the AAVE protocol. By integrating Uniswap, users can easily buy and sell aTokens on the open market.

Implementing the Integration

To integrate AAVE and Compound, developers can use the aave-js library to interact with the AAVE protocol and the Compound.js library to interact with Compound.

To interact with AAVE, developers will need to first create an instance of the LendingPool contract using the aave-js library.

const aave = new Aave(web3);
const lendingPoolAddress = await aave.contracts.getLendingPool();
const lendingPoolContract = new LendingPool(web3, lendingPoolAddress);

To interact with Compound, developers can use the Compound.js library to create an instance of the cEther (Compound Ether) contract, which represents the underlying asset in Compound’s lending and borrowing market.

const compoundEtherAddress = "0x4ddc2d193948926d02f9b1fe9e1daa0718270ed5";
const compoundEtherContract = new CompoundEther(web3, compoundEtherAddress);

With these contract instances, developers can call functions such as lend(), borrow(), and getBorrowRate() to interact with the AAVE and Compound protocols.

To integrate AAVE and Uniswap, developers can use the Uniswap.js library to interact with the Uniswap protocol and the aave-js library to interact with AAVE.

To interact with Uniswap, developers can use the Uniswap.js library to create an instance of the UniswapExchange contract for a specific token.

const uniswapExchangeAddress = "0x5c69bee701ef814a2b6a3edd4b1652cb9cc5aa6f";
const uniswapExchangeContract = new UniswapExchange(web3, uniswapExchangeAddress);

With these contract instances, developers can call functions such as addLiquidity(), removeLiquidity(), and swapExactTokensForTokens() to interact with the AAVE and Uniswap protocols.

For example, to add liquidity to the Uniswap exchange using AAVE’s aTokens, a developer could call the addLiquidity() function with the relevant aToken and underlying asset as arguments.

const minimumLiquidity = "10000000000000000000"; // 0.1 ETH in wei
const deadline = Math.floor(Date.now() / 1000) + 3600; // One hour from now
const aTokenAmount = "100000000000000000000"; // 1 aToken in wei
const assetAmount = "1000000000000000000"; // 0.01 ETH in wei

await uniswapExchangeContract.addLiquidity(
  minimumLiquidity,
  deadline,
  aTokenAmount,
  assetAmount,
  {from: userAddress}
);

Conclusion

In this lesson, we learned how to integrate AAVE with other DeFi protocols such as Compound and Uniswap. By using the aave-js and Compound.js libraries, developers can easily create powerful DeFi applications that allow users to borrow, lend, trade, and earn returns on a variety of assets.

Exercises

To review these concepts, we will go through a series of exercises designed to test your understanding and apply what you have learned.

Create a decentralized lending platform that allows users to borrow and lend ETH using AAVE’s variable rate model and Compound’s algorithmic interest rates.

To create a decentralized lending platform that allows users to borrow and lend ETH using AAVE’s variable rate model and Compound’s algorithmic interest rates, you can use the following code as a starting point:

// Set up contract instances and web3 provider
const aaveContract = new web3.eth.Contract(aaveAbi, aaveAddress);
const compoundContract = new web3.eth.Contract(compoundAbi, compoundAddress);
const provider = new Web3.providers.HttpProvider(providerUrl);
const web3 = new Web3(provider);

// Set up form for user to enter loan amount and asset
const form = document.getElementById('loan-form');
form.addEventListener('submit', async (event) => {
  event.preventDefault();
  const asset = form.elements.asset.value;
  const amount = form.elements.amount.value;
  try {
    // Borrow asset using AAVE's variable rate model
    const borrowTx = await aaveContract.methods.borrow(asset, amount).send({ from: userAddress });
    console.log(`Borrowed ${amount} ${asset} using AAVE: ${borrowTx.transactionHash}`);
  } catch (error) {
    console.error(error);
  }
});

// Set up form for user to enter lending amount and asset
const lendForm = document.getElementById('lend-form');
lendForm.addEventListener('submit', async (event) => {
  event.preventDefault();
  const asset = lendForm.elements.asset.value;
  const amount = lendForm.elements.amount.value;
  try {
    // Approve asset transfer to Compound
    const approveTx = await compoundContract.methods.approve(compoundAddress, amount).send({ from: userAddress });
    console.log(`Approved asset transfer: ${approveTx.transactionHash}`);
    // Lend asset using Compound's algorithmic interest rates
    const lendTx = await compoundContract.methods.enterMarkets([asset], [amount]).send({ from: userAddress });
    console.log(`Lent ${amount} ${asset} using Compound: ${lendTx.transactionHash}`);
  } catch (error) {
    console.error(error);
  }
});

Create a DeFi yield farming platform that allows users to earn returns by staking and lending their assets on AAVE and Compound.

To create a DeFi yield farming platform that allows users to earn returns by staking and lending their assets on AAVE and Compound, you can use the following code as a starting point:

// Set up contract instances and web3 provider
const aaveContract = new web3.eth.Contract(aaveAbi, aaveAddress);
const compoundContract = new web3.eth.Contract(compoundAbi, compoundAddress);
const provider = new Web3.providers.HttpProvider(providerUrl);
const web3 = new Web3(provider);

// Set up form for user to enter staking amount and asset
const stakeForm = document.getElementById('stake-form');
stakeForm.addEventListener('submit', async (event) => {
  event.preventDefault();
  const asset = stakeForm.elements.asset.value;
  const amount = stakeForm.elements.amount.value;
  try {
    // Approve asset transfer to AAVE
    const approveTx = await aaveContract.methods.approve(aaveAddress, amount).send({ from: userAddress });
    console.log(`Approved asset transfer: ${approveTx.transactionHash}`);
    // Stake asset on AAVE
    const stakeTx = await aaveContract.methods.stake(asset, amount).send({ from: userAddress });
    console.log(`Staked ${amount} ${asset} on AAVE: ${stakeTx.transactionHash}`);
  } catch (error) {
    console.error(error);
  }
});

// Set up form for user to enter lending amount and asset
const lendForm = document.getElementById('lend-form');
lendForm.addEventListener('submit', async (event) => {
  event.preventDefault();
  const asset = lendForm.elements.asset.value;
  const amount = lendForm.elements.amount.value;
  try {
    // Approve asset transfer to Compound
    const approveTx = await compoundContract.methods.approve(compoundAddress, amount).send({ from: userAddress });
    console.log(`Approved asset transfer: ${approveTx.transactionHash}`);
    // Lend asset using Compound's algorithmic interest rates
    const lendTx = await compoundContract.methods.enterMarkets([asset], [amount]).send({ from: userAddress });
    console.log(`Lent ${amount} ${asset} using Compound: ${lendTx.transactionHash}`);
  } catch (error) {
    console.error(error);
  }
});

Create a DeFi platform that allows users to trade AAVE’s aTokens on Uniswap.

To create a DeFi platform that allows users to earn returns by staking AAVE tokens and lending their assets on Compound, you can use the following code as a starting point:

// Set up contract instances and web3 provider
const aaveContract = new web3.eth.Contract(aaveAbi, aaveAddress);
const compoundContract = new web3.eth.Contract(compoundAbi, compoundAddress);
const provider = new Web3.providers.HttpProvider(providerUrl);
const web3 = new Web3(provider);

// Set up form for user to enter staking amount
const stakeForm = document.getElementById('stake-form');
stakeForm.addEventListener('submit', async (event) => {
  event.preventDefault();
  const amount = stakeForm.elements.amount.value;
  try {
    // Approve AAVE token transfer to staking contract
    const approveTx = await aaveContract.methods.approve(stakingContractAddress, amount).send({ from: userAddress });
    console.log(`Approved AAVE token transfer: ${approveTx.transactionHash}`);
    // Stake AAVE tokens
    const stakeTx = await stakingContract.methods.stake(amount).send({ from: userAddress });
    console.log(`Staked ${amount} AAVE tokens: ${stakeTx.transactionHash}`);
  } catch (error) {
    console.error(error);
  }
});

// Set up form for user to enter lending amount and asset
const lendForm = document.getElementById('lend-form');
lendForm.addEventListener('submit', async (event) => {
  event.preventDefault();
  const asset = lendForm.elements.asset.value;
  const amount = lendForm.elements.amount.value;
  try {
    // Approve asset transfer to Compound
    const approveTx = await compoundContract.methods.approve(compoundAddress, amount).send({ from: userAddress });
    console.log(`Approved asset transfer: ${approveTx.transactionHash}`);
    // Lend asset using Compound's algorithmic interest rates
    const lendTx = await compoundContract.methods.enterMarkets([asset], [amount]).send({ from: userAddress });
    console.log(`Lent ${amount} ${asset} using Compound: ${lendTx.transactionHash}`);
  } catch (error) {
    console.error(error);
  }
});

Add liquidity to the Uniswap exchange using AAVE’s aTokens and underlying assets.

To create a DeFi platform that allows users to earn returns by staking and lending their assets on AAVE and Compound and displaying their current balances and interest earned, you can use the following code as a starting point:

// Set up contract instances and web3 provider
const aaveContract = new web3.eth.Contract(aaveAbi, aaveAddress);
const compoundContract = new web3.eth.Contract(compoundAbi, compoundAddress);
const provider = new Web3.providers.HttpProvider(providerUrl);
const web3 = new Web3(provider);

// Set up function to display current balances and interest earned
const displayBalances = async () => {
  try {
    // Get current staked AAVE balance
    const stakedAAVE = await aaveContract.methods.balanceOf(userAddress).call();
    // Get current AAVE interest earned
    const aaveInterest = await aaveContract.methods.earned(userAddress).call();
    // Get current Compound balances
    const cTokenBalances = await compoundContract.methods.balances(userAddress).call();
    // Get current Compound interest earned
    const cTokenInterest = await compoundContract.methods.accumulatedInterest(userAddress).call();
    // Display balances and interest earned in DOM
    document.getElementById('staked-aave').innerText = stakedAAVE;
    document.getElementById('aave-interest').innerText = aaveInterest;
    Object.keys(cTokenBalances).forEach((cToken) => {
      const balance = cTokenBalances[cToken];
      const interest = cTokenInterest[cToken];
      document.getElementById(`${cToken.toLowerCase()}-balance`).innerText = balance;
      document.getElementById(`${cToken.toLowerCase()}-interest`).innerText = interest;
    });
  } catch (error) {
    console.error(error);
  }
};

// Set up form for user to enter staking amount and asset
const stakeForm = document.getElementById('stake-form');
stakeForm.addEventListener('submit', async (event) => {
  event.preventDefault();
  const amount = stakeForm.elements.amount.value;
  try {
    // Approve AAVE token transfer to staking contract
    const approveTx = await aaveContract.methods.approve(stakingContractAddress, amount).send({ from: userAddress });
    console.log(`Approved AAVE token transfer: ${approveTx.transactionHash}`);
    // Stake AAVE tokens
    const stakeTx = await stakingContract.methods.stake(amount).send({ from: userAddress });
    console.log(`Staked ${amount} AAVE tokens: ${stakeTx.transactionHash}`);
    // Display updated balances
    displayBalances();
  } catch (error) {
    console.error(error);
  }
});

// Set up form for user to enter lending amount and asset
const lendForm = document.getElementById('lend-form');
lendForm.addEventListener('submit', async (event) => {
  event.preventDefault();
  const asset = lendForm.elements.asset.value;
  const amount = lendForm.elements.amount.value;
try {
  // Approve asset transfer to Compound
  const approveTx = await compoundContract.methods.approve(compoundAddress, amount).send({ from: userAddress });
  console.log(`Approved ${asset} transfer to Compound: ${approveTx.transactionHash}`);
  // Get cToken address for chosen asset
  const cTokenAddress = await compoundContract.methods.getCToken(asset).call();
  // Lend asset on Compound
  const lendTx = await compoundContract.methods.supply(cTokenAddress, amount).send({ from: userAddress });
  console.log(`Lent ${amount} ${asset} on Compound: ${lendTx.transactionHash}`);
  // Display updated balances
  displayBalances();
} catch (error) {
  console.error(error);
}

Write a function that allows the user to borrow an asset from the Compound protocol. The function should take in the following parameters:
– asset: the asset the user wants to borrow (e.g. “DAI”)
– amount: the amount of the asset the user wants to borrow
The function should return the transaction hash of the borrow transaction.

async function borrowFromCompound(asset, amount) {
  try {
    // Get cToken address for chosen asset
    const cTokenAddress = await compoundContract.methods.getCToken(asset).call();
    // Borrow asset from Compound
    const borrowTx = await compoundContract.methods.borrow(cTokenAddress, amount).send({ from: userAddress });
    console.log(`Borrowed ${amount} ${asset} from Compound: ${borrowTx.transactionHash}`);
    // Display updated balances
    displayBalances();
    return borrowTx.transactionHash;
  } catch (error) {
    console.error(error);
  }
}

// Example usage: borrow 100 DAI from Compound
borrowFromCompound("DAI", 100);

This function allows the user to borrow an asset from the Compound protocol by taking in the asset and amount as parameters. It gets the cToken address for the chosen asset using the getCToken() method, and then calls the borrow() method of the compound contract to borrow the asset. It then displays the updated balances and returns the transaction hash of the borrow transaction.

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