So have you ever been wondering how lending and borrowing works in DeFi? How are the supply and borrow rates determined? And what is the main difference between the most popular lending protocols such as Compound and Aave? We’ll answer all of these questions in this video.
Lending and borrowing is one of the most important elements of any financial system. Most people at some point in their life are exposed to borrowing, usually by taking a student loan, a car loan or a mortgage.
The whole concept is quite simple. Lenders a.k.a. depositors provide funds to borrowers in return for interest on their deposit. Borrowers or loan takers are willing to pay interest on the amount they borrowed in exchange for having a lump sum of money available immediately.
DeFi lending allows users to become lenders or borrowers in a completely decentralized and permissionless way while maintaining full custody over their coins.