Lecture 4.0.0. Decentralized Lending and Borrowing
While hodling your cryptos, it is an old method to just let them stay in your wallet waiting for the price to appreciate. You can make good profits while still holding onto your cryptos.
One platform that allows you to make profits while still holding onto your cryptos is the Lending Platform. It is a platform where you keep your cryptos so that they are lent out. You will receive interest for lending out your cryptos. At the end, you will receive your cryptos back with the accrued interests.
There are two kinds of Lending Platforms:
(i). Centralised Finance (CeFi) Lending Platforms
This has been discussed in the modules of Class 5 in the Secondary SOC.
(ii). Decentralised Finance (DeFi) Lending Platforms
Have you tried to raise a loan from the bank? Have you remembered how a well-dressed official walked up to you with papers and a pen, sat with you for half an hour (even more, in some banks), subjecting you to numerous questions on your personal life and finances?
At the end you were told, “I’ll get back to you soon.”
You waited for the next 30 minutes (sometimes days, weeks, and even months) while they did credit checks on you.
After such painful waiting, you were invited back and given the verdict: “I’m sorry, you do not qualify. Reason: Your credit score is bad.” What an absurdity! What callousness!
That has denied many good people from getting financial help to pay for healthcare services, buy their dream houses, cars, vacation, pay hospital bills, set up the businesses of their heart desire, etcetera.
Indeed, the present world financial system is built to favour the rich and the powerful. The poor has to struggle to be welcomed into the class of the rich.
But DeFi is changing all of that.
In DeFi lending, you do not need anyone to check your documentations, check your credit scores, or any other artificial checks before you are qualified for a loan. No sex, race, tongue, or clime is excluded.
Through DeFi lending, you can obtain the loans you need for your healthcare, house, business, car, etc. in just a few clicks that last less than 5 minutes!
“How does this work?” you may wonder.