@montgomerie
What Is Crypto Lending, and How Does It Work?
Crypto lending allows users to borrow or lend cryptocurrency in exchange for interest, using decentralized or centralized platforms:
How It Works – Users deposit their crypto assets on lending platforms and earn interest, while borrowers provide collateral to secure loans.
Types of Crypto Lending:
CeFi Lending – Platforms like BlockFi, Nexo, and Celsius act as intermediaries.
DeFi Lending – Aave, Compound, and MakerDAO use smart contracts for peer-to-peer lending.
Collateralization – Loans are usually overcollateralized (e.g., borrow 50% of deposited ETH value).
Risks – Smart contract failures, liquidation risks due to price volatility, and platform insolvencies.
Why It’s Popular – Crypto lending enables passive income, leveraged trading, and access to liquidity without selling assets.
Crypto lending is an important part of DeFi and CeFi, offering financial services without traditional banking.
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