DeFi Lending: How It Works, Who Uses It, and What You Need to Know
When you lend crypto without a bank, you’re using DeFi lending, a system where people lend and borrow digital assets directly through smart contracts on blockchains. Also known as decentralized finance lending, it removes middlemen like banks and replaces them with code that automatically handles interest, collateral, and repayment. Unlike traditional loans, you don’t need a credit score. Instead, you lock up your crypto as collateral—usually more than the loan amount—to get cash or stablecoins back. If the value of your collateral drops too much, the system sells it automatically to cover the loan. No calls, no forms, no waiting.
This system runs on platforms like Aave, Compound, and dYdX, but you’ll also find it in niche tools like Slingshot Finance and Katana, which handle cross-chain lending without holding your funds. People use DeFi lending for three main reasons: to earn passive income on idle crypto, to get liquidity without selling their holdings, or to leverage positions for trading. But it’s not risk-free. If the market crashes fast, your collateral can be wiped out in minutes. That’s why users who succeed here don’t just chase high yields—they track loan-to-value ratios, understand liquidation thresholds, and avoid tokens with zero real demand.
DeFi lending doesn’t exist in a vacuum. It connects to yield farming, the practice of moving crypto between protocols to maximize returns, which often uses lending pools as a base layer. It also ties into crypto collateral, the digital assets locked up to secure loans, which can range from Bitcoin and Ethereum to obscure tokens like ING or AIX. And it’s shaped by regulations—like the EU’s MiCA rules—that now demand transparency on how lending platforms manage risk. Some platforms, like Gemini’s GUSD, are built for compliance. Others, like the ones behind dead tokens such as INTX or GMFI, vanish when the market turns.
What you’ll find below isn’t theory. It’s real cases: how xSUSHI lets you earn fees from lending pools, why Katana isn’t an exchange but a lending engine, and how DeFi for entertainment tokens on Soneium is trying to make lending feel like streaming music. Some posts expose scams pretending to be lending platforms. Others show you how to track your loans, avoid liquidation, and spot which protocols actually pay out. No fluff. No hype. Just what works—and what doesn’t—in today’s DeFi landscape.
