What is crypto lending and how does it work?

Key Points

1. Crypto lending removes the need for traditional banks or intermediaries, operating through CeFi (Centralized Finance) platforms managed by companies.

2. Lenders can earn high returns, with APYs often exceeding 10%, especially for stablecoins, while borrowers can access instant cash without selling their crypto assets.

3. Borrowers benefit from no credit score requirements, tax-efficient strategies, and the ability to retain upside potential on their collateralized crypto.

4. Users include everyday investors, traders, speculators, and institutions, utilizing crypto loans for leverage, diversification, growth, and advanced strategies like yield farming and hedging.

5. Risks include smart contract vulnerabilities, centralized platform security breaches, market contagion, extreme price volatility, and an evolving regulatory landscape.