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Aaveator 5C2C49BE-0B07-4C3F-8D36-B1FB2C7ACC0C Created with sketchtool. 138 Stranger 3 Mar 20 2023 9:58

Will AAVE rehypothicate collateral assets or are they locked in the smart contract until repayment?

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I am trying to understand how collateral assets work in AAVE smart contracts. Specifically, I am wondering if AAVE has the ability to rehypothicate these assets or if they are locked in the smart contract until repayment.

For example, if I deposit 10 ETH as collateral to borrow USDC, will my 10 ETH be used for AAVE lending or liquidity mining activities? I have gone through the documentation but could not find an answer to this question.

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undefined 5C2C49BE-0B07-4C3F-8D36-B1FB2C7ACC0C Created with sketchtool. 0 Stranger 0 Mar 22 2023 12:00

Any asset that you supply and its allowed to be borrowed can be borrowed, which means someone else could borrow it, but they would pay for it, so that raises the supply rate you get.

Basically assets used as collateral and that can be borrowed bring supply rate to suppliers