DeFi Lending: How to Borrow & Lend Crypto in the DeFi Market

TL;DR

• DeFi lending lets users borrow and lend crypto without intermediaries through smart contract-based lending pools.
• Liquidium offers a cross-chain lending experience where users can deposit bitcoin and borrow assets like USDT on other chains.
• Interest rates in DeFi are algorithmically adjusted based on demand, and loans are typically overcollateralized to help protect lenders.

What Is DeFi Lending?

DeFi lending, short for decentralized finance lending, is a system where crypto holders lend assets to borrowers without centralized intermediaries.

On the other side, borrowers post crypto collateral to gain access to the assets in the lending pool. As with other DeFi operations, blockchain-based smart contracts handle transactions, ensuring transparency and reducing fees.

How Is DeFi Lending Different from CeFi Lending?

In DeFi lending, all borrowing and lending activities are managed by smart contracts on blockchain platforms, removing the need for traditional financial intermediaries like banks. 

By contrast, CeFi lending works more like traditional finance, where banks or institutions facilitate and manage the lending process.

How Does DeFi Lending Work? 

The DeFi lending process relies on lending pools. Users who wish to offer their crypto for lending deposit a specific amount into these pools, which form a reserve of funds that borrowers can access. 

Transactions are automated through the smart contracts powering these pools.

The system allows lenders to contribute their assets to a shared pool, making them readily available for borrowers. In return, lenders earn interest on the assets they have deposited.

Liquidium vs. Aave vs. Compound: A DeFi Lending App Comparison

While Aave and Compound are both pioneers in DeFi lending, both are primarily focused on Ethereum and EVM-based blockchain ecosystems.

Liquidium, on the other hand, benefits from its cross-chain capability, which means users can deposit native BTC and borrow stablecoins on other chains without needing to bridge their Bitcoin to another chain beforehand. 

Its ICP-powered backend is designed to support speed, decentralization, and a straightforward user experience.

How to Use Liquidium for Cross-Chain DeFi Lending & Borrowing, Step-by-Step

Using Liquidium for cross-chain lending and borrowing is straightforward.

How to Lend Crypto on Liquidium

Visit app.liquidium.fi and connect your wallet.

Under the ‘Supply’ tab, choose the assets you wish to lend (more assets coming soon).

Click on the ‘Supply’ button and approve the transaction in your wallet.

Start earning interest and monitor your portfolio from the dashboard.

How to Borrow Crypto on Liquidium

Connect your wallet on app.liquidium.fi.

Supply assets as collateral in order to borrow.

Choose a loan asset you wish to borrow.

Confirm and initiate the loan.

Users never have to touch a bridge or leave the interface.

“DeFi lending should be simple, secure, and work across chains. With Liquidium, we’ve made it possible to unlock liquidity from Bitcoin and other L1 assets without complexity.” - Robin Obermaier, CEO & Co-Founder of Liquidium

Get Started With DeFi Lending on Liquidium

If you’re ready to earn interest on your digital assets, Liquidium offers a straightforward DeFi lending experience without bridges or complex setups.

Connect your wallet and start lending or borrowing with Liquidium.

FAQs

What is the best DeFi lender?

There are many different DeFi lending platforms available. For instance, Aave and Compound are established but limited to the Ethereum ecosystem.

Meanwhile, Liquidium is ideal if you’re looking for cross-chain lending, Bitcoin-collateralized loans, or more efficient capital usage.

How are interest rates determined in DeFi lending platforms?

Interest rates in DeFi lending are determined by supply and demand dynamics.

In platforms like Liquidium, these rates can follow dynamic interest rate models.

When demand for borrowing rises, rates go up. When it’s low, they drop. This adjustment happens automatically.