What is Lending and Borrowing in DeFi?. On‑chain lending lets users supply assets to earn interest and borrow against collateral without intermediaries.
How it works
Smart contracts set collateral ratios and liquidate under‑collateralized loans automatically based on oracle prices.
Why it matters
Transparent rules and global access are advantages, but oracle, contract, and liquidation risks persist.
Common pitfalls
- Borrowing near minimum collateral ratios
- Using volatile collateral for long loans
- Ignoring oracle reliability
Quick example
You deposit a stablecoin, borrow ETH for a trade, and repay with fees—positions update in real time on‑chain.
See also
- Oracle
- Collateral
- Liquidation
TL;DR: What is Lending and Borrowing in DeFi? defined in plain English with practical next steps.
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