Crypto lending is currently the largest sector in the Ethereum Decentralized Finance (DeFi) sector. More than $ 4.5 billion is in lending logs and the growth doesn’t seem to have stopped for a long time. On the contrary: Many suspect that 2020 will only mark the beginning for the emerging Ethereum sector.
The DeFi lending platforms want to make traditional financial services accessible to everyone without hurdles
The aim is to create an open banking system in which there is no central authority that controls the service.
With DeFi lending, investors and lenders use a decentralized system to issue loans or deposits against interest. Thus an individual or a company lends money against interest via a decentralized network. DApps, smart contracts, and other DeFi protocols are used in both lending and borrowing.
What is crypto lending?
DeFi loans are different from traditional lending and offer users various advantages and disadvantages.
Cryptocurrencies are volatile and many investors are quickly frustrated by price fluctuations. DeFi-Lending offers investors the opportunity to deposit cryptocurrencies for fiat money. This allows investors to use fiat money to meet other needs without selling their cryptocurrencies.
For example, a company that holds crypto assets and doesn’t want to sell them could simply turn to a DeFi lending platform to deposit crypto for fiat. This would allow the company to finance a project without selling its crypto holdings.
Returns on holding crypto assets
In addition, you can be rewarded for holding your crypto assets without giving your cryptocurrencies to an outside party. This works by lending your assets at agreed interest rates that are set in a smart contract and receiving returns in return. Thus, as an individual, you can become your own bank. In the following, we take a closer look at the five largest lending platforms.