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Top 6 DeFi Lending Platforms

9 mins
Updated by Artyom Gladkov
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Decentralized Finance (DeFi) refers to financial products and services that exist on the blockchain and imitate those in TradFi. One of the key services in this space is DeFi lending. In this article, we will look at the top five DeFi lending platforms, plus everything you need to know about traditional vs. DeFi lending.

The listed platforms have all been carefully selected based on their track record and reputation within the DeFi community.

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What is DeFi lending?

top 5 defi lending platforms
DeFi TVL: DeFi Llama

DeFi lending, or decentralized finance lending, is similar to the traditional lending service offered by banks, except that it is offered by peer-to-peer decentralized applications (DApps). The DeFi lending market has risen substantially since 2020. The Total Value Locked (TVL) in DeFi protocols is currently $41.1 billion.

In traditional finance, people set up a savings account and deposit fiat to receive interest on their deposit. But for DeFi, crypto investors can lock their funds or use them to provide liquidity to liquidity pools and receive interest. Notably, DeFi rates are much greater than those offered in the traditional financial space, making DeFi lending a much better option for earning passive income.

The traditional financial system (TradFi) offers services such as lending, borrowing, spot trading, and margin trading. However, the DeFi ecosystem has adapted and can offer the same services and financial products as traditional systems.

Which DeFi lending platforms are best and why?

dYdX

Derivatives exchange
Max loan-to-value (TVL)
125% collateral
Collateral
USDC
Borrow
37
Blockchain
Ethereum

Bake (ex. Cake DeFi)

Yield aggregator
Max loan-to-value (TVL)
50%
Collateral
BTC, ETH, DFI, and 2+
Borrow
DUSD
Blockchain
DeFi Chain

Summer.fi

Borrowing and lending market
Max loan-to-value
67%
Collateral
ETH, RETH, WBTC, and 2+ assets
Borrow
Blockchain
Ethereum and Optimism

Aave

Borrowing and lending platform
Max loan-to-value (LTV)
80%
Collateral
11 cryptos
Borrow
11 cryptos
Blockchain
Ethereum, Arbitrum, and 5+ chains

Compound

Borrowing and lending platform
Max loan-to-value (LTV)
83%
Collateral
12 cryptos
Borrow
16 cryptos
Blockchain
Ethereum

MakerDAO

Decentralized reserve bank
Max loan-to-value (LTV)
66%
Collateral
15 cryptos
Borrow
Dai
Blockchain
Ethereum

Yearn Finance

Yield Aggregator
Max loan-to-value (LTV)
N/A
Collateral
70+ cryptos
Borrow
N/A
Blockchain
Ethereum

DeFi lending vs. traditional lending

One of the main differences between traditional lending and DeFi is that traditional banking requires time-consuming and onerous checks on a customer’s financial status. On the other hand, with DeFi, a loan is granted instantaneously, so long as the individual meets the collateral requirements. Smart contracts take care of much of the review process, making it easier for both the lender and borrower.

DeFi loans also typically offer much better returns when compared to traditional lending markets — and even equity. While the specific rate varies greatly, loans can often be 10% or higher than other assets. This is one of the key reasons why DeFi’s popularity exploded in 2020.

On the other hand, the technology is still in its infancy, so there are some risks. Sometimes this technology does not perform as expected at runtime. Conversely, a lack of regulation and safety protocol means DeFi systems are sometimes open to exploitation.

Benefits of DeFi lending platforms

One of the key benefits of DeFi lending platforms is their ability to provide fast and easy access to capital, often without the need for traditional credit checks or lengthy application processes. This makes them an attractive option for borrowers who may not be able to access traditional forms of lending and for lenders looking for alternative investment opportunities.

DeFi lending platforms often offer a wide range of loan terms and repayment options, allowing borrowers to find a loan that fits their specific needs.

Risks of DeFi lending platforms

There are several risks to be aware of when using DeFi lending platforms. Similarly, it is important to do your due diligence and carefully research any platform you’re considering using. DeFi lending platforms often rely on smart contracts to facilitate loans and other transactions. However, if these smart contracts contain vulnerabilities, it could potentially lead to the loss of funds.

What’s more, some DeFi lending platforms may not have sufficient liquidity to cover all of their outstanding loans, which could lead to delays in repayment or even defaults. While not exclusive to DeFi, this type of lending is subject to market risk as the value of the assets used as collateral for loans may fluctuate. To mitigate these risks, it is good practice only to lend or borrow an amount that you can afford to lose.

This means that lenders may face losses if the value of the collateral decreases. This however is not exclusive to cryptocurrency. There is market risk in TradFi markets as well.

Faster and easier than TradFi

DeFi lending platforms have become an increasingly popular way for borrowers to access capital and for lenders to earn high returns on their investments. The top five DeFi lending platforms we have highlighted in this article are all well-established and respected in the DeFi community and offer a range of loan terms and repayment options to suit the needs of different users. It’s important to carefully consider the risks and do your due diligence before using any DeFi lending platform.

Frequently asked questions

What is TradFi?

What is DeFi?

What are the risks of DeFi lending?

How are smart contracts used in DeFi?

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Ryan Glenn
Ryan Glenn is a journalist, writer, and author. Ryan is motivated to educate as many people as possible on the benefits of web3 and cryptocurrency. He has authored “The Best Book for Learning Cryptocurrency,” and runs an educational platform, web3school.us, dedicated to demystifying the crypto space. Ryan built the platform to transition tech-savvy and non-tech individuals into crypto and give everyone a baseline understanding of the different fields in the cryptosphere. Ryan is also an...
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