YIELDS & RETURNS

Lending (DeFi Lending)

Definition

Lending in DeFi allows users to lend their crypto assets to earn interest. Smart contracts automatically manage the lending process, eliminating the need for traditional intermediaries.

Example

💡 Example

You can lend USDC on Aave to earn interest paid by borrowers who need liquidity.

Risks to Consider

⚠️ Risks
  • Smart contract risk
  • Bad debt
  • Interest rate volatility

Related Terms

Related Articles

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Money markets like Aave, Compound or Maker are the heart of the DeFi ecosystem. For the final user, these protocols have the same function than a classic bank : borrowing or putting sleepy money at work by lendind it. Nevertheless, the analogy stops immediately at this functional comparison. Indeed, the underlying logic of money markets has nothing to do with the functioning of a bank. Money markets benefit from all the advantages of DeFi and, in particular, the transparency and accessibility of all operations.
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Money markets are at the heart of DeFi. From a high-level perspective, yes, they simply enable the borrowing and lending of various assets. Yet those functions are like the two primitive verbs of DeFi at the base of pretty much all use cases. There are three major money markets right now in DeFi: Aave, Compound & Cream. Yet all the following services use them, one way or another: Yearn Finance, Curve Finance, Alpha Finance, Harvest Finance, DeFiSaver, Saffron, 88MPH, Idle Finance, etc. To put it simply - money markets are one of the root-level of DeFi.
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