Make money with lending and liquidity mining

Lending and borrowing is the DeFi variant of money lending as we know it from the traditional financial sector: you go to a bank, ask for money and get a loan. When things go well. Before that, however, the bank will give us a thorough check, even if we are already a customer. A German bank will obtain a Schufa report, check our employer and check whether we are creditworthy.

If we have some money left over instead, we can also deposit it in the bank and set up corresponding savings accounts. If the conditions are good, we get a small annual interest rate for it. Ideally, our money multiplies. At least if it can keep up with the current inflation rate.

In the DeFi space, money lending works a little differently.

Lending and liquidity mining in DeFi space

The biggest difference is probably the lack of registration or login. Because anyone who interacts with a DeFi protocol does not have to leave any data that refers to their own identity. This means: The platform never knows who it is dealing with. Security without an identity check through collaterals This raises the question: how can you ensure that the money you borrowed will actually be returned? The answer is: through collateral in the form of cryptocurrencies. Anyone who wants to borrow money on a decentralized protocol must deposit enough cryptocurrencies that exceed the total value of the money borrowed. The deposited cryptocurrencies are kept in a smart contract.