DeFi has been one of the hottest and fastest-growing sectors of the cryptocurrency industry in 2020. The term ‘DeFi‘ or decentralized finance, is a phrase that describes any financial services platform that is built using distributed ledger technology, usually blockchain.
While the sector has been steadily growing for several years, DeFi’s popularity really began to explode during the summer months of 2020, when the prices of a number of tokens belonging to DeFi platforms skyrocketed.
While most of these token prices have receded, the influx of capital into the DeFi ecosystem has brought an unprecedented amount of attention and new users to the DeFi space, particularly to the DeFi lending sector.
DeFi Lending Platforms: Here’s What You Need to Know
- Similar to traditional peer-to-peer lending platforms, DeFi lending platforms allow their users to lend their assets to others. In return, they receive interest payments. Because these platforms deal in cryptocurrency, the interest payments are almost always paid in crypto. Because these DeFi lending platforms are operated without a centralized “middle-man,” more of the platforms’ financial rewards are passed directly onto their users.
- Additionally, DeFi lending platforms make it possible for any individual to take out a loan