DeFi lending and borrowing is a system that allows users to lend and borrow cryptocurrencies without the need for a centralized intermediary, such as a bank. This is done through smart contracts, which are self-executing contracts that are stored on the blockchain.
To lend cryptocurrencies on DeFi, users deposit their assets into a liquidity pool. This pool of assets is then used to provide loans to other users. The interest rates on these loans are typically much higher than traditional ones, making them attractive to lenders.
To borrow cryptocurrencies on DeFi, users must provide collateral. This collateral is typically a cryptocurrency, and it is used to secure the loan. If the borrower defaults on the loan, the lender can sell the collateral to recoup their losses.
DeFi lending and borrowing is a relatively new system, but it is growing rapidly.
Here are some of the most popular DeFi lending and borrowing protocols: Compound: Compound is a popular DeFi lending protocol that allows users to lend and borrow a variety of cryptocurrencies. Aave: Aave is another popular DeFi lending protocol that offers a variety of features, including flash loans and margin trading. MakerDAO: MakerDAO is a DeFi protocol that allows users to create and manage the DAI stablecoin. DAI can be used as collateral to borrow other cryptocurrencies. Synthetix: Synthetix is a DeFi protocol that allows users to create synthetic assets that track the price of real-world assets, such as stocks and commodities. These synthetic assets can be used as collateral to borrow other cryptocurrencies.
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