6 DeFi Lending Platforms (Part I)
Referring to the digital assets and financial smart contracts, protocols, and decentralized applications (Dapps) built on Ethereum, DeFi is financial software built on the blockchain that can be pieced together like Money Legos. Decentralized lending platforms provide loans to businesses, or the public with no intermediaries are present. On the other hand, DeFi lending protocols enable everyone to earn interest on supplied stable coins and cryptocurrencies. Here are the six major DeFi Lending Platforms:
1. Aave -Aave is an open-source and non-custodial protocol enabling the creation of money markets. Users can earn interest on deposits and borrow assets. (Part Ⅰ)
2. dYdX -The most powerful open trading platform for crypto assets. Margin trade, borrow and lend cryptocurrency. (Part Ⅰ)
3. Compound -Compound is an algorithmic, autonomous interest rate protocol built for developers, to unlock a universe of open financial applications. (Part Ⅱ)
4. Maker -Builders of Dai, a digital currency that can be used by anyone, anywhere, anytime. (Part Ⅱ)
5. Fulcrum -Try non-custodial crypto margin trading at DeFi platform Fulcrum. Enter into short/leveraged positions up to 5x without open fees. ETH and wBTC are available. (Part Ⅲ)
6. NUO Network -Lend and Borrow Cryptocurrency. The non-custodial way to lend, borrow or margin trade crypto assets. (Part Ⅲ)
1. **Aave -**Aave is an open-source and non-custodial protocol enabling the creation of money markets. Users can earn interest on deposits and borrow assets.
Aave is an open-source non-custodial protocol on Ethereum for decentralized lending and borrowing. For lenders, the protocol mints ERC20-compliant aTokens at a 1:1 ratio to supplied assets. Interest immediately starts compounding continuously, represented by a steady increase in the amount of aTokens held by the lender. The interest stream may be redirected to any address, separate from the aTokens that represent the underlying principle.
Aave supports both stable and variable interest rates, giving stable and borrowed loans flexibility that other lending protocols lack. It offers the most diverse range of DeFi tokens, meaning users can use supplied Dai as capital to take out a loan in a number of rising assets. Users can trade their aDai interest rates on SwapRate with up to 10x leverage.
Aave includes notable distinguishing features such as uncollateralized loans, “rate switching”, Flash Loan, and unique collateral types. Aave offers flash loans: trustless, uncollateralized loans where borrowing and repayment must occur in the same transaction. Aave’s native governance token is LEND; the only fees are 0.25% of originated loans and 0.09% of flash loans; these go toward burning LEND, rewarding lenders, and compensating affiliates.
Aave has seen significant growth in 2020, most of which can be tracked using Aave Watch — a tool to monitor key metrics like borrows and fees collected. Similarly, users can check out Aave Burn to see how many protocol fees have been used to burn LEND off the open market. Users can borrow against most supplied assets; the collateralization ratio and liquidation threshold depend on the asset, as does the liquidation penalty, which anyone can get as a bonus for liquidating an unhealthy loan. Interest rates adjust algorithmically based on supply and demand, but Aave lets borrowers opt in to and out of (at any time) a stable rate that changes less often. The protocol keeps a liquidity reserve to ensure withdrawal at any time.
How to use Aave
To start using the Aave protocol, head over to the native web interface, app.aave.com. After you connect your Ethereum wallet, you can click on the Deposit and Borrow links to see which assets in your wallet are supported and the current interest rates for all assets on Aave which supports nearly 20 Ethereum-based assets including but not limited to:
Support Assets
Basic Attention Token (BAT), Dai (DAI), Ethereum (ETH), Kyber Network (KNC), Aave (LEND), ChainLink (LINK), Decentraland (MANA), Maker (MKR), Augur (REP), Synthetix (SNX), TrueUSD (TUSD), USD Coin (USDC), Tether (USDT), Wrapped BTC (WBTC), 0x (ZRX), and Synthetix USD (SUSD).
As the lending protocol currently offering the highest rates on Dai (without a strong degree of inherent risk), Aave is a great place to lend and borrow Dai without worrying about the safety of the underlying protocol.
2. **dYdX -**The most powerful open trading platform for crypto assets. Margin trade, borrow and lend cryptocurrency.
Originating from the US, dYdX is an Ethereum-powered non-custodial trading platform that enables crypto traders to go long and short digital assets on margin, offering permission less lending and margin capabilities for ETH, USDC, and DAI.
Users can leverage dYdX to trade Ether on margin with up to 5x leverage and — as of May of 2020 — supported geographies can trade perpetual Bitcoin futures with up to 10x leverage. Lenders can earn up to 5.10%, while borrowers can pay as little as 0.51% interest p.a. (depending on the asset). Over $19.4 million of Ethereum-based tokens are currently locked up in the dYdX protocol.
With dYdX, users deposit collateral to a non-custodial orderbook so that orders can happen off-chain. This means that you will only pay gas when depositing and withdrawing assets from dYdX. The advantage of this system is that orders can be placed simply by signing a transaction, rather than waiting to have it processed on the Ethereum network.
How to use dYdX
To get started, visit dYdX’s interface and enable MetaMask, which connects your Ethereum address to your dYdX account. You can access some features directly from your wallet, but be sure to fund your dYdX account to enable all trading options and start earning interest. With dYdX you can easily earn passive income on your crypto holdings. Any funds deposited to dYdX will continuously earn interest. Funds can be deposited and withdrawn at any time. Interest rates are automatic and dynamic, so you will always earn market rate without ever having to worry about setting specific interest rates.
Support Assets
ETH, DAI, and USDC
Here we wrap up Part Ⅰ. Please stick to Part Ⅱ & Part Ⅲ for further reading…