Lending and Borrowing in DeFi Explained — Aave, Compound

What Is Lending and Borrowing

Let’s start with what lending and borrowing is.

Lending and Borrowing in Crypto

In the cryptocurrency space, lending and borrowing is accessible either through DeFi protocols such as Aave or Compound or by CeFi companies, for instance, BlockFi or Celsius.

Lending and Borrowing in DeFi

DeFi lending allows users to become lenders or borrowers in a completely decentralized and permissionless way while maintaining full custody over their coins.

How Does It Work

Let’s dive deeper into the mechanics of Compound and cTokens.

Risks

DeFi lending, although reducing a lot of risks associated with centralized finance, comes with its own risks.

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