DeFi Lending: Collateral, Rates and Risks

DeFi lending without the marketing fog: collateral, liquidation, rate models and aggregation. Follow the core analysis and risk-checking path.

Contents

Lending protocols are one of DeFi’s root primitives. They let users borrow against collateral, supply assets for yield, build leveraged strategies, and issue stable assets. The surface looks simple, but the risk sits in collateral listings, oracle assumptions, liquidation design, governance, liquidity, and rate models.

Reading Path

Start here

  1. DeFi Lending Risks: A Money-Market ChecklistAssess DeFi lending risks: collateral, oracles, liquidation rules, admin control and insurance assumptions. A framework, not a safety stamp.Expert23 minute read

    Risk first: the framework, not a ranking of today's markets.

  2. The Cycle of Aggregation Spins On, Now with LendingThe real edge isn’t in finding the rate; it’s in owning the rails that connect them all.Intermediate6 minute read

    What the aggregation layer changes, and what it merely hides.

  3. Is this a Lending Protocol Renaissance?A 2024 tour of DeFi lending designs: CDPs, money markets, user-set rates and protocols trying to merge the models. Innovations and their trade-offs.Intermediate11 minute read

    The 2024 CDP and money-market designs and their trade-offs.

  4. Leverage Like a Sir: Polynomial Gains, No Liquidation PainsExploring a novel protocol offering no funding fee no liquidation leverage with convex returns, and announcing my involvment.Intermediate16 minute readAuthor project

    A different leverage mechanism and the risks that come with it.

  5. veNFTs: Autopilot, 40Acres and haiVELOHow Autopilot, 40Acres and haiVELO use veNFTs for automation, collateral and leverage. The mechanisms and risks behind locked yield.Expert5 minute read

    When voting positions become collateral and leveraged yield.

Historical cases

Dated mechanism studies, not current product instructions. Historical does not mean defunct: check each post's context before acting.

  1. Reflexer RAI: A Stable Asset With No Dollar PegHow Reflexer RAI uses ETH collateral and a floating redemption price instead of a dollar peg. The mechanics, trade-offs and governance limits.Intermediate16 minute read

    The 2021 RAI design: ETH collateral and a floating redemption price.

  2. Liquity: Governance-Free Borrowing on ETH, ExplainedHow Liquity works: ETH-backed loans with no recurring interest, the LUSD stablecoin, the Stability Pool, and why no governance makes it unstoppable.Intermediate14 minute read

    Liquity V1's 2021 LUSD design, not Liquity V2 or BOLD.

  3. Money Market Innovations: Where DeFi Lending Goes NextHow DeFi lending evolves past Aave and Compound: better liquidations with B.Protocol, self-repaying loans with Alchemix, and fixed-rate experiments.Intermediate11 minute read

    The 2021 design taxonomy, including Alchemix-style loans.

  4. 🌽 Defi money markets cookbookMoney markets like Aave or Alchemix are essential in DeFi. This article explains and illustrates some strategies to take advantage of the different options they offer.Expert9 minute read

    The original 2021 strategy patterns. Parameters are not current instructions.

  5. 🎚 ETH exposure or DeFi yields: why choose?The Maker leverage strategy I executed in 2020: keeping ETH exposure while borrowing DAI for DeFi yield, with debt and liquidation risk to manage.Intermediate8 minute read

    A 2020 Maker borrowing recipe, not a current rate recommendation.

Core Concepts