How do DeFi loans work?

Asked 2 years ago

Hi, I've been thinking about lending my crypto to make some more money, but I'm not sure what this entails. How exactly do DeFi loans work?

Reid Hart

Monday, April 25, 2022

DeFi loans are simple, and if you are someone who loves the privacy and the permissionless nature of the blockchain, DeFi loans can be yet another opportunity for you to make money silently and passively. As a lender in most of these protocols, you will receive tokens that are the equivalent of your deposited asset plus the interest. The interest is based on the calculated APY which is always available on the platform issuing the loan. So if the APY is 100%, you will have the value of your asset deposited plus the interest paid by those who borrowed your loan. The highest possible amount after a year will be 100% of your initial deposit which you can withdraw whenever you like. Protocols you can try are: Anchor, Compound, JustLend, Aave, Benqi (QI), and Parallel Finance.

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