Lending Protocol
A DeFi application that lets users lend their crypto to earn interest or borrow against their holdings.
Explained Simply
Lending protocols like Aave, Compound, and Morpho connect crypto lenders and borrowers through smart contracts without intermediaries. Lenders deposit assets into a pool and earn interest. Borrowers provide collateral (typically 150%+ of the loan value) and pay interest. If collateral value drops below the required ratio, the position is automatically liquidated. Lending protocols are core DeFi infrastructure, but they carry smart contract risk and can be affected by market volatility.
Example
You deposit 10 ETH into Aave as collateral and borrow 15,000 USDC against it, paying 3% annual interest.
Related Tools
Put this knowledge into practice with these tools.
This content is for educational purposes only and does not constitute financial, tax, or legal advice. Always consult a qualified professional for advice specific to your situation.