DeFi & Yield

How do DeFi lending and borrowing protocols work?

DeFi lending and borrowing protocols are smart-contract systems that let users lend crypto to earn interest or borrow against collateral they deposit, without a bank as intermediary. Lenders supply assets to a shared pool and receive a variable interest rate; borrowers post collateral worth more than the loan and pay interest set by supply and demand. If collateral value falls below a required threshold, the protocol can automatically liquidate it. For example, you might deposit ETH and borrow a stablecoin against it. These systems carry liquidation, smart-contract, and market risks, and outcomes are not guaranteed.

Crypto investments are subject to market risk and volatility. Past performance is not indicative of future returns. This is general information, not investment advice — consider your own circumstances or consult a qualified adviser before investing.