Traditional banking systems have many loopholes and the recent phenomenon, DeFi or Decentralized finance, seems promising enough to alleviate such problems. Defi lending platforms serve as the new financial service provider that utilises Blockchain technology and cryptocurrency. We have done a rundown of some of the best defi lending platforms that are revolutionizing financial space.
Popularly known as open finance, Defi is at the forefront of pioneering the open banking revolution where individuals don’t need to rely on a central party for financial services.
On DeFi lending platforms, investors and lenders issue a loan amount or deposit fiat (USD for example) for interest through a distributed blockchain system and a decentralized application. Likewise, an individual or business borrows that money for interest through a decentralized network. Both the parties rely on DApps (Decentralized Apps), Smart contracts, and other DeFi protocols for lending and borrowing.
How does DeFi lending work?
Let’s say as an investor you have $70,000 to loan out through a DApp. All you need to do is to open a DApp which hosts a smart contract and a pool of prospective borrowers.
With a single click, you can decide on what interest rate you want to offer a loan, and then commence with lending straight away. The smart contract here quickly automates lending and borrowing agreement where both, the lender and borrower, easily complete the transaction without any hassles.
Best DeFi Lending Platforms in 2021
1) Maker DAO
Popularly known as Multi-Collateral Dai (MCD) system, or Maker protocol is a reputable DeFi lending and borrowing platform that was founded in 2015. It is one of the best Defi Lending platforms that was started to circumvent the volatility of cryptocurrencies. An open-source protocol built on Ethereum, MakerDAO enables users who have ETH and access to MetaMask wallet to lend via DAI currency.
Currently, its DAI is pegged around the dollar value for lending and borrowing once the smart contract terms and conditions are met. Akin to many DeFi lending platforms, MakerDAO hosts a dual token model: Maker, and Dai. The platform offers users with interest rates of 9.05%, 4.6% respectively for both the tokens, and 30D average rate.
Another Ethereum based open source and non-custodian DeFi ledning protocol, AAVE enables the creation of money markets. It has recently seen a surge in popularity for lending and borrowing options.
Like many other defi lending platforms, AAVE also offers a dual DeFi token model: aToken and LEND. The interest rate for both is pegged at 0.25% and 0.09%, respectively.
A multi-purpose DeFi platform for managing digital assets, InstaDApp excels in offering DeFi services that run the gamut from swapping, leverage to lending, and borrowing. In a nutshell, InstaDApp is more on the lines of modern DeFi bank that allows you to integrate your services that serve a specific purpose.
With its one-click switching platforms option, users can easily switch to cheaper lending platforms that proffer lower interest rates. All in all, it is one of the best DeFi lending platforms out there.
Built on Ethereum Blockchain, Compound is a well-known, openly accessible smart contract that allows borrowers and lenders to seamlessly lock all their crypto assets into the protocol.
In a stark contrast to other DeFi lending platforms, Compound allows tokenization assets that are locked in their system via the use of cTokens. Tokenization is useful in that it allows crypto users to have a digital representation of their assets to lend, trade, and more.
5) Dharma Protocol
Dharma Protocol is a decentralized debt and funding platform that relies on tokenization wherein borrowers, lenders, underwriters, relayers and other fund managers trade and transact with each other.
Dharma Protocol has its very own Dharma Settlement smart Contracts, which is heavily influenced from the traditional financial instruments, and stakeholders that are a staple of the traditional loan facilitation process.
A unique platform that has introduced gamification aspects for lending, Kitte Fight is one of the best defi lending platforms for gamers and other crypto users.
With gaming as a method of adding liquidity using yield farming and incentivized tournaments, KittieFight ensures that gamers and developers alike receive incentives for hosting DApps, and reap rewards for playing games.
dYdX has revolutionized the blockchain ecosystem with the introduction of margin trading, options, and derivatives that are a staple of fiat currency markets and commonplace in traditional investment sectors.
On dYdX’s platform, crypto enthusiasts can trade, lend, or borrow ETH, USDC and DAI. As well as cross margin trading, dYdX also offers isolated margin trading and offers a perpetual market contract of BTC/USDC of up to 10x leverages. Loans on the dYdX are available on 115% self-liquidation and 125% collateral.