📝 Definition:
Lending is letting someone borrow your crypto, in exchange for a fee.
You lend your cryptocurrency to someone, and they pay you back with a little extra as a thank you, which we call interest.
🔑 Key Features:
- Earn Interest: You make money from the interest charged on the loan.
- Crypto as Loan: Instead of cash, you lend cryptocurrencies.
- Short or Long Term: You can lend for a few days, months, or even longer.
- Risks Involved: There’s a chance the borrower might not pay back, that's why you usually ask for collateral.
⚙️ How It Works:
- Choose a Platform: You start by picking a platform that lets people lend and borrow crypto.
- Deposit Your Crypto: You put your digital money into the platform.
- Set Terms: Decide how long you want to lend your crypto and at what interest rate.
- Earn Interest: As the borrower uses your crypto, you earn interest that accumulates over time.
💡 Applications:
- Personal Profit: Many people lend crypto to earn passive income.
- Business Operations: Businesses might lend their excess crypto to manage cash flow and earn extra money.
- Staking: In some cases, lending also involves staking your crypto to help maintain the blockchain network.
🔍 Example:
Think of lending like having a lemonade stand.
If your friend needs more lemons to sell their lemonade but doesn’t have the money to buy them, you give them some of your lemons.
They sell their lemonade and then pay you back with a few extra dollars for helping them out. In crypto, you lend your Bitcoin (BTC) or other crypto and get more back in return thanks to interest.