DeFi / Lending

Lending: collateral, rates and liquidation

Understand supplied liquidity, active borrowing, utilization and the risks that determine lending returns.

Lending protocol TVL

USD billions · Aave, Maker/Sky, Compound, Morpho

Supply

Depositors provide assets to a pool and receive variable interest based on utilization and protocol incentives.

Borrow

Borrowers lock collateral and pay interest. Collateral factors and oracle prices determine available borrowing power.

Liquidation

If collateral falls below the required threshold, liquidators can repay debt and receive a discount. Volatility can create losses.

Before depositing or borrowing

  • Check oracle design, reserve factor and insurance coverage.
  • Compare base APY, incentives, utilization and withdrawal liquidity.
  • Use conservative collateral ratios and understand stablecoin depeg risk.