DeFi Lending

When diving into DeFi lending, the practice of borrowing and earning interest using decentralized finance platforms. Also known as crypto lending, it relies on smart contracts instead of banks, letting anyone lend or borrow assets on-chain.

One of the biggest draws is the variety of rate mechanisms. Aave, a leading protocol that offers both variable and stable interest rates introduced the concept of rate switching, while Compound, an algorithmic money market that automatically adjusts rates based on supply and demand popularized the supply‑side interest model. MakerDAO, the stablecoin‑backed lending system that uses collateralized debt positions adds a governance layer that can tweak stability fees. Together, these platforms show how DeFi lending encompasses protocol design, collateral management, and community governance.

Key concepts that shape the ecosystem

Understanding the interest rate models, the formulas that decide how much borrowers pay and lenders earn is crucial. Variable rates react instantly to market utilization, while stable rates lock in a predictable percentage for a set period. This difference influences risk appetite: high‑frequency traders might chase variable returns, whereas long‑term holders prefer the certainty of stable rates.

Another core element is collateral type. Protocols accept everything from ETH and stablecoins to tokenized real‑world assets. The choice of collateral affects liquidation thresholds and borrowing power. For example, MakerDAO’s multi‑collateral system lets users lock DAI‑compatible tokens, creating a diversified risk profile.

Finally, governance plays a silent but powerful role. Token‑holders vote on parameter changes, new assets, and fee structures. This democratic process means the health of a lending platform often mirrors the activity of its community.

Below you’ll find a curated set of articles that break down these ideas in detail. From deep dives into Aave’s rate‑switching mechanics to step‑by‑step guides on using MakerDAO’s vaults, the collection covers the full spectrum of DeFi lending. Whether you’re just starting out or looking to fine‑tune a portfolio, these pieces give you the context and tools you need to make informed decisions.