homepostsWhat is DeFi lending?

What is DeFi lending?

Kevin VoigtNov 15, 2021

This term refers to the total amount of funds that can be borrowed based on the quality of the collateral provided. For example, Dai and Ether (ETH) possess a collateral factor of 75% on the DeFi lending platform Compound, which means that users can take a loan of up to 75% of the value of their supplied Dai or ETH.

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Also to know is, what is Crypto lending?

In short, crypto lending is an alternative investment form, where investors lend fiat money or cryptocurrencies to other borrowers in exchange for interest payments. So there'd be two main parties involved in this loan. The lender, who will receive interest from the borrower in exchange for the loan.

Subsequently, what is the point of a DeFi loan? Defi lending benefits both lenders and borrowers. It offers margin trading options, allows long-term investors to lend assets and earn higher interest rates. It will also enable users to access fiat currency credit to borrow loans at lower rates than decentralized exchanges.

Furthermore, is DeFi lending safe?

Taking out loans

However, DeFi loans aren't without risk. Lending protocols like Aave require users to put up collateral — a portion of funds that acts as security for the loan. ... The risk is compounded when DeFi protocols rely on price oracles, which can sometimes be unreliable when providing price data.

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About The Author

Kevin Voigt

Kevin is an Entrepreneur, Digital Nomad, Student, and ICO Marketing Manager currently based in Berlin & Champaign. He is actively involved in the Blockchain space and has worked in numerous projects in the Silicon Valley since 2017. His interests revolve around Finance, Consulting, and Blockchain Research.

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