Meta Desc: DeFi lending platforms offer crypto loans to individuals in a trustless manner, without requiring intermediaries and have the highest lending growth rate among all lending services.
DeFi Lending platforms are set to disrupt traditional systems. Many individuals are starting to choose DeFi lending platforms due to the advantages it provides over traditional lending. While there are several DeFi lending platforms available in the market nowadays, not all of them provide the same level of services. To shed light on this, here are 12 facts that will help anyone select their favorite DeFi lending platforms.
- Functionality of lending
DeFi protocols use smart contracts to enable decentralized borrowing and lending. This replaces the usual risk functions in conventional finance. Lenders can put their cryptocurrency holdings to use and gain interest as incentives. On the other hand, borrowers can receive these funds as long as they use digital assets to over collateralize the amount.
- Any borrower can have access to liquidity
DeFi lending allows any interested borrower to access liquidity as long as there is enough collateral. The interest rates are decided by an algorithm that balances the supply and demand of the assets borrowed and lent.
- Avoid crypto assets sitting idly
DeFi lending can help offset the risk of losing the value of some of their digital assets to inflation by providing them with interest gains.
- Systematic over-collateralization
DeFi lending applications do not involve any traditional credit checks on potential borrowers. This makes collateral posting essential to mitigate credit and fraud risks.
- Improved loan origination speed
DeFi lending platforms can provide fast processing speeds as they are mostly backed by cloud-based services, analytics for fraud identification and detection, and machine learning calculations. Lenders can send offers via e-contracts as soon as the loan is approved.
- Lending decision consistency
DeFi lending platforms follow detailed rules which describe credit policies. This eliminates variation in evaluating applicant attributes and structuring deals by underwriters.
- Use of analytics
Analytics can help borrowers and lenders get to maximize the most out of the digital learning process. Since loan applications are monitored over a particular duration, lenders can anticipate and allocate proper resources to accommodate seasonal demands.
- Permission less lending
Since DeFi lending is open and allows permission less access anyone with a crypto wallet can access them, regardless of where they stay.
- Transparency provided
The nature of blockchain is such that every transaction on the network is verified by every user on the network. This provides a high degree of transparency which allows for rich data analysis.
- Immutability provided
Because of blockchain’s inherent nature, DeFi lending ensures tamper-proof data coordination which increases security and checking.
- Programmability and interoperability
Smart contracts are highly programmable and are automatically executed. This enables the easy development of new financial instruments and digital assets. DeFi lending platforms also use an interconnected software stack, which enables a seamless integration.
DeFi market participants can keep strong custody of their assets and control their data by the use of Web3 wallets like Metamask.
Many industry experts are of the opinion that NFT tokens list , and the DeFi lending can reshape the entire financial system. The superior grade technology and a growing number of participants have allowed DeFi lending to decentralize core traditional financial services.