Lending, Borrowing & Stablecoins

DeFi lending allows you to deposit crypto to earn interest, or borrow against your holdings without selling them. Smart contracts manage everything, interest rates adjust in real-time based on supply and demand. You deposit ETH as collateral into Aave, borrow USDC against it, and keep your ETH exposure while accessing liquidity.

The critical risk: liquidation. If your collateral's value drops below the protocol's minimum ratio, your position gets automatically liquidated. Always maintain a healthy buffer above the liquidation threshold. Major protocols include Aave (multi-chain), Compound (Ethereum-native), and MakerDAO (issues the DAI stablecoin).

Stablecoins are the backbone of DeFi. Fiat-backed (USDC, USDT) hold real dollars. Crypto-backed (DAI) use over-collateralized deposits. The stablecoin market exceeds $200 billion in 2025, with increasing regulatory clarity under frameworks like the GENIUS Act.

Stablecoins serve as the base currency for most DeFi activity: borrowing, lending, providing liquidity, and denominating trades. They're also increasingly used for real-world payments and remittances, especially in emerging markets with unstable local currencies.