Guide to DeFi Lending Platform Development

Several sectors have started experimenting with the potential of Blockchain, and finance is no exception. From online payments to cryptocurrency trading and storage, Blockchain is metamorphosing the traditional finance system with a new evolutionary concept, DeFi or decentralized finance. 

There is no shadow of a doubt that traditional finance instruments, such as lending loans using a trusted third party as an intermediary, have persisted since the industrial era. As the finance world is transformed by the advent of DeFi, new and improved ways of lending assets are appearing on the market, and DeFi lending is one of them. 

DeFi lending is one of the upsurging parts of the cryptosystem. According to the report, DeFi lending has raised more than seven-fold since March 2020 to $3.7 billion. Several crypto holders are showing interest in DeFi lending platform development to lend their assets and earn lucrative interests. 

What is DeFi lending?

DeFi lending platforms allow users to offer crypto loans in a decentralized manner, i.e., providing full control over their funds at all times and giving ease to users to enlist their crypto coins on the lending platforms. It promotes peer-to-peer or P2P lending, allowing borrowers to take a loan directly through a decentralized platform without any third-party involvement. 

DeFi Lending vs Traditional Lending 

The primary difference between DeFi and traditional lending that crypto enthusiasts have appreciated is that conventional banking involves a time-consuming lending process, extensive paperwork and continuous checks on a customer’s status somehow raises the question of privacy. On the other hand, DeFi lending platforms grant loans faster when an individual meets collateral requirements. In addition to it, DeFi lending also offers better returns than traditional lending systems. 

Working Model of DeFi Lending

Holding crypto assets in wallets won’t make any earnings. The DeFi lending platform development allows individuals to come up with a robust platform that allows them to lend their crypto assets to someone via lending pools. Anyone can become a lender in the DeFi world and pool and distribute their assets to borrowers using smart contracts. An individual sends their assets to a smart contract (an automated digital intermediary) that allows the coins to become available to borrowers. The smart contract also issues interest tokens that are divided automatically to the user and can be redeemed at the end stage in place for one’s underlying assets.

The traditional bank loan system requires collateral. For instance, for a home loan, the home is itself collateral. When a user fails to pay the loan, the bank has the right to seize their property. The same applies to decentralized lending systems except that it involves crypto as collateral instead of any physical property. The crypto used as collateral should also be worth more than the actual loan itself. 

How do Defi Lending Platforms Benefit the Financial Services Sector?

The following are some benefits of DeFi lending platform development for the finance sector-

• Lending and Borrowing

The aforementioned DeFi lending applications involve P2P lending and borrowing protocols. The user can directly take a loan directly through a DeFi platform, such as Aave, Compound, and Maker, without any intermediary. 

• Asset Management

Defi lending protocols allow users to be custodians of their crypto assets. It gives an ease to quickly & securely interact with the dApps and take advantage of services of buying, selling, transferring crypto, and earning interest on investments.

• Savings

DeFi lending platforms offer a number of ways for users to manage their savings. Users can simply avail interest-bearing account (savings dApps like Dharma, Argent, and PoolTogether) services and earn more with several decentralized lending platforms.

Are There any Risks Involved in DeFi Lending?

CeFi or centralized finance platforms work in the same way as most banks. It takes custody of one’s deposited assets, loans them out to third parties, and provides the original depositor with returns. This CeFi model appears to be well on paper; however, prone to several issues, including theft, insider jobs, hacks, etc.

However, the story is different with DeFi lending platforms as there are no practical dangers associated with it. At the same time, the entire process of lending and borrowing with DeFi platforms is not complicated which also adds to the user experience. There are certain differences in terms of how different protocols work, but it isn’t considered one of the biggest problems. 

Furthermore, the user must be cautious while using the DeFi lending platforms. Insert the correct wallet numbers and address details to avoid loss of funds, as recovery in such cases is not possible. 

Let Antier Build a DeFi Lending Solution for You!

The DeFi lending and borrowing platforms are a new trend in the crypto space that is gaining worldwide crypto enthusiasts and investors’ attention to a major extent. The way it provides individuals the opportunity to earn interest by lending their crypto assets, no doubt, it has the potential to transform the DeFi world. 

If you want to reap the benefits of DeFi lending platforms, get in touch with Antier. The company has a breadth of experience facilitating your business flows by providing the best DeFi platform development services. Connect with the team and share your DeFi lending platform requirement today!