DeFi lending is depositing crypto assets on a DeFi lending platform to be borrowed to other users while receiving interests. DeFi lending works as banks in traditional finance. As people deposit their money in banks, banks loan these funds to people who pay back with higher interests.
As DeFi booms to new areas, DeFi loan protocols are now a way to loan crypto assets and earn a passive income without a central authority. In addition, DeFi lending benefits both the lenders and the borrowers as it utilizes blockchain technology to bring transparency and easy access to loans.
DeFi loan protocols are easy to access by both parties. The borrower puts up a value greater than the amount borrowed as collateral to take a loan, through non-physical assets. If the borrower pays back as agreed, then the collateralized assets are returned. For the lenders, their assets are talking into a pool that works with smart contracts. DeFi loan protocols typically offer more interest than banks.