First we will Talk About Onchain Lending
What is On-Chain Lending? Let’s Break It Down!
On-chain lending is like borrowing or lending money but without using a bank. Instead, it happens directly on the blockchain—a transparent, decentralized digital system. It’s a major part of decentralized finance (DeFi) and allows people to lend or borrow cryptocurrencies in a trustless and secure way.
Here’s how it works:
1. Borrowers deposit collateral (usually another cryptocurrency) into a lending platform to secure their loan.
2. Lenders provide the funds and earn interest in return.
3. All transactions are governed by smart contracts, which are automated programs that ensure everyone follows the rules.
Why is it so exciting?
No Middleman: Everything happens directly between users, making it faster and often cheaper.
Global Access: Anyone with crypto and internet access can participate.
Transparency: All activity is recorded on the blockchain, so nothing is hidden.
How it Impacts the Market
On-chain lending boosts liquidity by enabling people to use their crypto without selling it. However, it can also add volatility, as market swings can trigger liquidations if collateral drops in value.
As on-chain lending grows (recently surpassing $20 billion in active loans), it’s becoming a driving force in the crypto market. It’s shaping a future where financial freedom is accessible to everyone.
This surge suggests that more people are borrowing and lending directly on the blockchain, bypassing traditional banks. Such growth can lead to increased liquidity in the crypto market, potentially driving up the value of digital assets. However, with rapid expansion comes the risk of market corrections.