GlossaryIntermediate
Lending Protocol
A DeFi application that lets users lend or borrow crypto directly through smart contracts.
A lending protocol is a DeFi application that allows users to supply crypto to earn interest, or to borrow crypto by posting other assets as collateral, all coordinated automatically through smart contracts.
Interest rates on a lending protocol often adjust automatically based on supply and demand for each asset, rather than being set by a central institution.
Examples
- A lending protocol might let a user deposit one token to earn interest while others borrow it against collateral.
- Borrowing from a lending protocol typically requires posting collateral worth more than the loan itself.