Defi-lending – What is it and what are its benefits?

Decentralized finance (DeFi) is quite a buzzword in the world of cryptocurrencies, this tool producedrevolution in the field of borrowing and lending.

If you have an internet connection, you cantake loans or lend, provided you play by the rules. This simplicity and affordability has allowed DeFi to overcome the obstacles created by traditional financial institutions in the form of third-party involvement and ongoing audits.

DeFi is a term that suggestsborrowing or lending through the crypto network. Technically, this lending space is similar to a traditional institution offering financial loans to individuals and businesses. The only difference is that DeFi does it without a middleman.

As a blockchain user, you cantransfer your coins to a specific credit platform, which can be transferred to another user at interest. DeFi lending is governed by smart contracts. Usually, when you lend or borrow funds, you sign an agreement with the other party that details all the details such as the repayment period, interest rate, etc.

Compared to traditional DeFi lendingoffers noticeable benefits. The most important of these are transparency and simplicity of the process due to the absence of a third party. It is enough to have an account on one of the DeFi platforms and a crypto wallet, then the smart contract is verified within a few minutes.

deposit currency equal to or greater than the loan amount. This is the so-called collateral and it can be provided in different currencies. Most crypto platforms allow you to add funds via bank transfer, Apple Pay, or card. Alternatively, you can send Bitcoin or Ethereum directly from your wallet.

Then you need to conclude an agreement throughsmart contract and complete loan processing. At the end of the repayment period, the principal amount and interest are returned, only then the collateral can be returned. It's pretty simple.

The most popular decentralized protocolFinancing Compound allows borrowers and lenders to interact directly and receive a floating interest rate. Similar services are provided by Maker, Aave and Nuo Network.

So, in order to use the new tool, you need to open an account, buy some coins and sign a smart contract to provide a loan or loan.

</p>

Rate this publication