💰 DeFi Lending: Borrow & Earn Interest
Learn how Aave and Compound enable permissionless lending
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Decentralized lending and borrowing protocols allow you to earn interest on crypto assets or access liquidity without selling your holdings—all without traditional banks or credit checks.
What is DeFi Lending?
DeFi lending platforms connect lenders (who supply assets) with borrowers (who need liquidity) through smart contracts. Unlike traditional finance, everything is automated, permissionless, and transparent on the blockchain.
Key Innovation
No credit checks, no paperwork, no approval process. Smart contracts automatically execute loans based on collateral value. Anyone with a crypto wallet can participate globally.
🎮 Interactive: Explore Participant Roles
Select a role to understand different perspectives in DeFi lending:
Lender
Supply crypto assets to earn passive interest
✓ Benefits
- • Earn interest on idle assets (typically 2-15% APY)
- • Withdraw anytime (instant liquidity)
- • No lockup periods required
- • Lower risk compared to other DeFi strategies
⚠ Risks
- • Smart contract vulnerabilities
- • Platform insolvency risk
- • Interest rate fluctuations
How Does It Work?
For Lenders
- 1.Deposit assets into a lending pool (e.g., ETH, USDC)
- 2.Receive interest-bearing tokens (aTokens, cTokens)
- 3.Interest accrues automatically in real-time
- 4.Withdraw anytime (assets + earned interest)
For Borrowers
- 1.Deposit collateral (must be >100% of loan value)
- 2.Borrow up to allowed limit (typically 50-75% of collateral)
- 3.Interest accrues continuously on borrowed amount
- 4.Repay loan + interest to unlock collateral
Popular DeFi Lending Platforms
| Platform | Total Value Locked | Supported Assets | Key Feature |
|---|---|---|---|
| Aave | $10B+ | 30+ tokens | Flash loans, rate switching |
| Compound | $3B+ | 20+ tokens | Algorithmic rates, COMP rewards |
| MakerDAO | $5B+ | DAI stablecoin | Mint DAI against collateral |
| Curve Finance | $2B+ | Stablecoins focus | Low slippage, high efficiency |
Why Use DeFi Lending?
- •Permissionless: No KYC, credit checks, or geographic restrictions
- •Transparent: All rates, rules, and transactions visible on-chain
- •Composable: Integrate with other DeFi protocols (yield farming, leverage)
- •Efficient: Automated liquidations, instant settlement, 24/7 availability