If you are a crypto holder, you already know about DeFi (Decentralized Finance) lending, which allows you to earn competitive interest rates by lending your assets through peer-to-peer marketplaces.
Surprisingly, DeFi lending has multiplied recently, with a staggering $48.91 billion Total Value Locked (TVL) reported this year.
This expansion has fueled the emergence of notable DeFi lending platforms such as Maker, Aave, and Compound, which have respective valuations of $4.25 billion, $2.82 billion, and $2.64 billion.
Want to learn more about DeFi lending?
Continue reading to understand the complexities of DeFi lending and its operational dynamics to maximize your cryptocurrency holdings’ returns.
Let’s explore the intriguing world of DeFi lending together!
What is DeFi?
DeFi, or Decentralized Finance, refers to a financial system built on blockchain technology, offering accessible and transparent alternatives to traditional banking.
In DeFi, smart contracts automate transactions, removing the need for intermediaries like banks.
It enables users to borrow, lend, and trade cryptocurrencies with greater flexibility, inclusivity, and security, ultimately reshaping how people engage with financial services.
What is DeFi Lending?
DeFi lending is a decentralized form of traditional lending in which users can borrow and lend bitcoins without the use of third-party middlemen such as banks.
It uses blockchain technology and smart contracts to enable smooth transactions between lenders and borrowers.
Lenders deposit cryptocurrency into lending pools to receive interest on their deposits. Borrowers can obtain loans by pledging their Bitcoin holdings as security and repaying the principal plus interest.
Since 2020, the DeFi lending market has grown significantly.
The current Total Value Locked (TVL) under DeFi protocols is $51.7 billion (according to 19th December 2024), as you can see in the image below:
Key Features of DeFi Lending
A portion of the greater Decentralized Finance (DeFi) ecosystem, DeFi lending is centered on borrowing and lending activities without using conventional middlemen like banks.
Here are some key features of DeFi lending:
- Decentralization: Operates on blockchain, using smart contracts to eliminate the need for centralized intermediaries.
- Smart Contracts: Self-executing contracts automate lending processes, including interest rates and collateral management.
- Permissionless Access: Open to anyone with an internet connection and a compatible wallet, bypassing centralized approval.
- Collateralization: Borrowers provide collateral, held in a smart contract and automatically liquidated in case of default.
- Global Accessibility: Accessible worldwide, enabling global financial participation without traditional banking.
- Interoperability: Protocols designed for seamless asset movement across different DeFi platforms.
- Transparent and Auditable: Transactions are transparent and traceable on the blockchain, fostering trust and community scrutiny.
- Programmability: Enables programmable financial transactions, allowing users to automate complex strategies.
- Yield Farming and Liquidity Mining: Incentive mechanisms like yield farming and liquidity mining offer additional token rewards.
Benefits of DeFi Lending
DeFi lending offers a range of benefits to both borrowers and lenders.
Let’s look into two lists of benefits DeFi lending provides to borrowers and lenders:
Benefits for Borrowers
- Accessibility: Available to anyone with an internet connection and a cryptocurrency wallet, providing an option for borrowers excluded from traditional loans.
- Transparency: Blockchain transactions offer transparency, allowing borrowers to easily track loan details, interest rates, and repayment schedules.
- Uncollateralized Loans: Provides uncollateralized loans (flash loans) without requiring assets, appealing to those without traditional collateral.
- Programmable Liquidity: Enables innovative financial products like leveraged trading and yield farming, helping borrowers optimize returns and achieve financial goals.
Benefits for Lenders
- Higher Interest Rates: Offers competitive interest rates due to market competition and lower decentralized protocol costs.
- 24/7 Availability: Accessible around the clock for managing lending activities and earning interest.
- Reduced Costs: Eliminates intermediaries, resulting in lower transaction fees, operational costs, and higher returns.
- Global Reach: Allows lenders to participate globally, expanding opportunities by accessing a broader pool of borrowers.
Use Cases of DeFi Lending
DeFi lending presents a broad range of use cases extending beyond traditional borrowing and lending scenarios.
Notable examples include:
- Collateralized Loans: Borrowers can utilize crypto assets as collateral, avoiding credit checks or traditional collateral.
- Yield Farming: Optimization of returns on deposited assets through various DeFi protocols.
- Leveraged Trading: Traders can amplify positions using borrowed funds without intermediaries on DeFi lending platforms.
- Stablecoin Liquidity: Stablecoins like DAI find popularity for earning interest in liquidity pools or accessing loans, providing stability amid market volatility.
DeFi Lending vs. Traditional Banking
People in traditional banking open savings accounts and deposit money to earn a return on their deposit.
However, in the case of DeFi, crypto investors can either lock their assets or use them to supply liquidity to liquidity pools and earn income.
DeFi rates are significantly higher than those available in the regular financial sector, making DeFi lending a far superior choice for generating passive income.
The following image will help you develop a clear image of the differences between traditional lending and DeFi lending:
Let’s now look at the table below, which summarizes the distinctions between DeFi lending and traditional banking:
| Feature | DeFi Lending | Traditional Banking |
| Intermediary Requirement | No intermediaries required; peer-to-peer system | Requires banks or financial institutions |
| Transaction Speed | Fast, facilitated by smart contracts | Slower, subject to banking hours |
| Transaction Costs | Generally lower | Higher due to operational costs |
| Accessibility | Open to anyone with internet access | Limited by geography and financial standing |
| Asset Control | Full control over assets | Controlled by the institution |
| Transparency | High; blockchain records are public | Limited; proprietary systems |
| Flexibility | Customizable loan terms | Standardized loan products |
| Regulatory Oversight | Limited or none | Regulated by financial authorities |
| Risks | Smart contract vulnerabilities, market volatility | Credit risk, operational risk |
How Does DeFi Lending Work?
DeFi lending functions through the participation of lenders and borrowers within smart contract-enabled protocols.
Lenders contribute crypto assets to form liquidity pools, while borrowers access these pools by over-collateralizing with their crypto assets to secure loans.
The interest paid by borrowers on collateralized loans is distributed to lenders.
The following image illustrates the working process through which DeFi operates:
Illustrative Example
Consider the case of Compound Finance operating on the Ethereum blockchain. Lenders deposit crypto assets into liquidity pools, earning cTokens in return.
These cTokens can be redeemed for the original assets at any time. Interest, received as cTokens, adds to the lender’s returns. Lenders are rewarded with COMP tokens for contributing liquidity to the lending protocol.
For borrowers, the process involves providing crypto assets as collateral, with the collateral’s value determining the borrowing power and, subsequently, the loan limit.
Upon full repayment of the loan and interest, borrowers regain possession of their collateral.
DeFi Borrowing
DeFi borrowing is obtaining cryptocurrency loans without the involvement of traditional financial institutions like banks.
Instead, it utilizes decentralized finance (DeFi) platforms built on blockchain technology. These platforms enable borrowers to access loans by depositing collateral in other cryptocurrencies.
The collateral guarantees the lender, ensuring that the borrower can repay the loan in case of default.
Key Features of DeFi Borrowing
Let’s highlight key features of DeFi borrowing:
- Intermediary-Free: DeFi removes banks and intermediaries, ensuring transparent and manipulation-resistant lending terms.
- Universal Access: Accessible to anyone with a crypto wallet and internet, breaking down geographical and regulatory barriers.
- Automated Efficiency: Smart contracts automate loan processes, eliminating manual intervention for seamless borrowing experiences.
- Dynamic Rates: DeFi platforms offer variable interest rates, responding to market conditions for borrower benefit.
- Secure Collateralization: Borrowers deposit collateral exceeding the loan value, ensuring lender compensation in case of default.
How Does DeFi Borrowing Work?
DeFi borrowing involves users depositing crypto assets as collateral into smart contracts. The collateral’s value determines the borrowing limit.
Borrowers can then access loans in the form of crypto assets or stablecoins, facilitating diverse financial activities.
Interest accrues on borrowed amounts, and once the loan is repaid along with interest, borrowers regain control of their collateral.
This decentralized process eliminates intermediaries, enabling efficient and transparent lending within the decentralized finance ecosystem.
Benefits of DeFi Borrowing
Following are the benefits you can get through DeFi borrowing:
- Lower Interest Rates: DeFi borrowing often offers lower interest rates than traditional loans due to the absence of intermediaries and the competitive nature of the DeFi space.
- Faster Approval Process: The automated nature of DeFi lending platforms typically leads to faster loan approval times than traditional lending processes.
- Enhanced Access to Credit: Individuals with poor credit history or those without traditional banking relationships may find it easier to access credit through DeFi lending.
- Cross-Border Transactions: DeFi borrowing facilitates seamless cross-border transactions, enabling borrowers to access loans from anywhere in the world.
- Transparency and Auditability: Blockchain technology ensures transparency and auditability of transactions, giving borrowers more visibility into their loan terms and repayment history.
How to Get Started with DeFi Lending?
Decentralized finance (DeFi) lending and borrowing may prove an interesting venture, enabling an innovative model of financial services without the limits of traditional intermediaries.
However, to have a safe and fulfilling experience, you must approach DeFi with prudence and thorough preparation.
Here’s a comprehensive guide to navigating the process effectively:
Step 1: Research and Due Diligence
Before entering into DeFi lending, you must do your homework.
Understand the foundations of decentralized finance the hazards of lending and borrowing, and become acquainted with major DeFi lending platforms.
Examine for community reviews, security inspections, and the track history of the platforms you’re considering using.
Keep updated on the newest developments in the DeFi space.
Step 2: Wallet Setup and Funding
To participate in DeFi lending, you’ll need a compatible digital wallet.
Choose a secure wallet that supports the assets you intend to lend or borrow. Popular options include MetaMask, Trust Wallet, and Ledger.
Set up your wallet and ensure it’s adequately funded with the cryptocurrency you plan to use for lending or as collateral.
Familiarize yourself with wallet security practices like seed phrase backup and two-factor authentication.
Step 3: Selecting a DeFi Lending Platform
Choose a DeFi lending platform that aligns with your preferences and risk tolerance.
Consider factors such as interest rates, supported assets, collateral requirements, and user interface. Opt for platforms with a transparent and user-friendly interface, as it enhances the overall experience.
Verify the security measures implemented by the platform, including smart contract audits and insurance coverage.
Step 4: First Transaction: A Step-by-Step Guide
Once you’ve selected a DeFi lending platform, it’s time to make your first transaction. Here’s a step-by-step guide:
- Visit the DeFi platform’s website or connect to its decentralized application (DApp) using your cryptocurrency wallet.
- Select the “Lend” or “Deposit” option.
- Choose the cryptocurrency you want to deposit as collateral.
- Specify the amount of cryptocurrency you wish to lend.
- Review the interest rate and collateral requirements.
- Confirm the transaction and approve it in your cryptocurrency wallet.
Once your deposit is confirmed, you’ll earn interest on your collateral. To borrow funds, follow a similar process, selecting the “Borrow” option and specifying the amount you want to borrow.
Ensure your collateral exceeds the required threshold to prevent liquidation.
Remember, DeFi lending is a dynamic and evolving sector, so stay informed about the latest developments, emerging trends, and potential risks.
Engage with the DeFi community through forums, social media, and educational resources to gain insights and make informed decisions.
3 Major Risks in DeFi Lending
Decentralized Finance (DeFi) provides unique options but is not without risk.
Let’s look at three primary hazards of DeFi lending:
- Impermanent loss
- Flash loan attacks
- DeFi rug pulls.
While part of the evolving DeFi ecosystem, these hazards necessitate caution and deliberate consumer decision-making traversing this decentralized financial landscape.
1. Impermanent Loss
When contributing assets to a DeFi liquidity pool, there’s a risk of “impermanent loss.” This occurs due to price changes in the pool, impacting the value of assets compared to holding them in a wallet.
The Automated Market Maker system relies on arbitrage traders, causing coin ratio changes and impermanent losses.
Example
Let’s take a look at the graph below to comprehend impermanent loss in a better way:
The following is a summary of the data in the graph and the connection between price shift and percentage loss:
- 1.25x price change = 0.6% loss
- 1.50x price change = 2.0% loss
- 1.75x price change = 3.8% loss
- 2x price change = 5.7% loss
- 3x price change = 13.4% loss
- 4x price change = 20.0% loss
- 5x price change = 25.5% loss
Tip: Mitigate impermanent losses by providing liquidity to pools with less volatile assets, such as stablecoins.
2. Flash Loan Attacks
Flash loans are a sort of uncollateralized lending that is exclusive to the DeFi industry.
There are two sorts of loans under the classic, centralized banking model:
- Unsecured loans: These do not require security because they are often for small sums of money, such as a few hundred dollars.
- Secured Loans: These are bigger and require security, such as a home, car, etc. Banks have methods to analyze client reliability throughout the loan process, such as credit ratings, reports, and more.
Flash loans, utilizing smart contracts, offer unsecured borrowing without collateral, eliminating traditional banking risks.
Borrowers access significant crypto funds instantly but must repay in the same transaction within seconds. The decentralized process lacks credit score barriers, enabling unlimited borrowing.
However, flash loan attacks, where bad actors exploit these loans, grab headlines.
Example
An attack on PancakeBunny led to a 95% drop in BUNNY token value. Attackers borrowed BNB, manipulated BUNNY prices, and dumped assets, profiting $3 million.
Liquidity pools, drained by such attacks, expose providers to impermanent loss, shaking investor confidence in affected projects.
Recovery for tokens like BUNNY is rare.
3. DeFi Rug Pulls
In DeFi lending, trust is crucial as traditional regulations are absent. Unfortunately, users face rug pulls—exit scams in which developers launch a new token, pair it with a major cryptocurrency, and establish a liquidity pool.
Marketing the token with promises of high yields, they attracts deposits.
Once the pool holds a significant amount of the major cryptocurrency, developers exploit intentional back doors in the token’s smart contract to create millions of new coins, selling them for the popular cryptocurrency.
This depletes the pool of the major cryptocurrency, leaving worthless coins and the founders vanishing without a trace.
DeFi scam is a billion-dollar sector that, despite efforts by developers to limit dangers, is a pervasive component of the expanding field.
According to reports, the initial half of 2021 saw three times the number of DeFi breaches and fraud as the entire year of 2020.
Look at this graph to understand better:
Example
A notable example is the “billion-dollar rug pull” involving SushiSwap developer Chef Nomi, which led to a near-zero token price.
Note: DeFi-related hacks and fraud have surged, reaching new highs in Q2 2021.
How to Avoid DeFi Lending Threats
Despite the prevalent rise in malicious activities, there are ways to assess a company for potential exit scams before investing.
These methods include:
- Checking the team’s credibility on previous projects.
- Thoroughly reviewing a project’s white paper.
- Verifying if the project’s code has undergone third-party auditing.
- Staying vigilant for red flags, such as unrealistic projected returns and excessive spending on promotions.
While the permissionless nature of DeFi protocols makes them susceptible to theft, it is also their source of potential to revolutionize the finance industry.
With limited regulatory oversight and the open-source nature of blockchain, vulnerabilities persist in lending protocols handling substantial funds.
Over time, the aim is to mitigate these risks across the blockchain industry.
Which DeFi Lending Platforms Are the Best, and Why?
The DeFi lending landscape constantly evolves, with new platforms and services launching regularly.
DeFi platforms cut out intermediaries, such as banks, allowing users to take charge of their finances. Users can participate in activities like lending, borrowing, and trading cryptocurrencies.
There are several DeFi lending platforms accessible, each with its own distinct set of features and perks.
The graph below shows new DeFi assets per month from 2018 to 2020.
I have prepared a detailed list of the 5 best DeFi lending platforms of 2024 for you. Let’s go through it.
1. Aave
Aave is a popular DeFi lending platform with more than $4.5 billion in total value locked (TVL).
It is based on the blockchain technology known as Ethereum and automates lending and borrowing through smart contracts. The market determines lending and borrowing interest rates, which may vary over time.
The platform’s over-collateralization model ensures borrowers have ample collateral to back their loans, fostering security and stability.
Its innovative flash loans enable users to borrow and repay loans within the same transaction, opening up a realm of creative applications.
Key Features of Aave
- Robust ecosystem with overcollateralization, flash loans, and Aavegotchi NFTs
- User-friendly interface and mobile app
- Support for a wide range of cryptocurrencies
- Decentralized governance
Pros of Aave
- Comprehensive set of features catering to diverse user needs
- Engaging gamified NFT project
- Seamless user experience across various platforms
- Secure and decentralized ecosystem
Cons of Aave
- Relatively complex platform for beginners
- Relatively high transaction fees
2. Compound
Compound is another prominent DeFi lending provider that uses the Ethereum network. It is renowned for its intuitive user interface and various supported assets, providing a seamless experience for lenders and borrowers.
Its computational interest rate approach, which changes both lending and borrowing rates according to market demand, distinguishes it.
This results in an evolving and efficient market where users may generate interest in their possessions or borrow at competitive rates.
The decentralized nature of the Compound ensures that users keep complete control over their cash, eliminating the requirement for intermediaries.
This and its connection with multiple wallets and dApps cement Compound’s place as a key participant in the fast-changing DeFi scene.
Key Features of Compound
- Streamlined user experience for lending and borrowing
- Decentralized governance fostering community involvement
- Support for a wide range of cryptocurrencies
- Commitment to continuous development and innovation
Pros of Compound
- User-friendly interface and intuitive navigation
- Decentralized governance promoting transparency and accountability
- Support for various cryptocurrencies
- Active development team fostering continuous improvement
Cons of Compound
- Relatively limited set of features compared to some other DeFi platforms
- Not as widely adopted as some other platforms
3. MakerDAO
MakerDAO is well-known for its stablecoin DAI, which originates via overcollateralized loans with Ethereum-based goods as collateral.
Users can enter their possessions into the MakerDAO platform and create DAI as collateral. This one-of-a-kind process secures the DAI token’s stability, making it a key competitor in the DeFi financing sector.
The decentralized governance mechanism of MakerDAO enables MKR token holders to impact decision-making, assuring the system’s flexibility and security.
The protocol’s capacity to keep the DAI’s value pegged to the US Dollar even during market turbulence has cemented its place as a pillar of the DeFi ecosystem.
Its pioneering approach to decentralized financing is shaping the future of decentralized finance.
Key Features of MakerDAO
- Innovative Collateralized Debt Position (CDP) model
- Active community governance fostering user participation
- Widely adopted and respected platform
- Support for various collateral assets
Pros of MakerDAO
- Pioneering platform for stablecoin creation with DAI
- Active community governance promoting transparency and accountability
- Widely adopted and well-respected platform
- Support for various collateral assets
Cons of MakerDAO
- Relatively complex platform for beginners
- Potential for governance conflicts
4. Synthetix
Synthetix is a decentralized exchange (DEX) that allows users to trade synthetic assets or synths. Synths represent the value of real-world assets, such as fiat currencies, stocks, and commodities.
This means that users can trade synths 24/7 without the need for intermediaries like banks or brokers.
Synths are created by users who deposit collateral into the Synthetix protocol. The collateral is used to back the value of the synths, and it is also used to pay for transaction fees.
Synthetix has several advantages over traditional exchanges.
For example, synths are always available, not subject to market manipulation, and can be traded without KYC or AML.
Key Features of Synthetix
- Ability to gain exposure to traditional assets without owning them
- Diversified asset exposure through liquidity pools
- Decentralized governance promoting transparency and accountability
- Support for various asset classes
Pros of Sythetix
- Innovative approach to gaining exposure to traditional assets
- Diversified asset exposure through liquidity pools
- Decentralized governance fostering user participation
- Support for various asset classes
Cons of Sythetix
- Relatively complex platform for beginners
- Potential for price manipulation
5. Curve Finance
Curve Finance is a decentralized exchange (DEX) specializing in stablecoin trading.
Stablecoins are cryptocurrencies pegged to a fiat currency like the US dollar. Therefore, they are less volatile than traditional cryptocurrencies and are a more attractive option for traders who want to avoid market risk.
Curve Finance uses a special algorithm to optimize the liquidity of its pools. This algorithm helps to ensure that the prices of stablecoins are stable and that there is always enough liquidity available to support trades.
Curve Finance has several advantages over traditional exchanges.
For example, it is more efficient, decentralized, and secure than traditional exchanges.
Key Features of Curve Finance
- Specialized in stablecoin swaps
- Algorithmically optimized liquidity pools
- Low transaction fees and minimized slippage
- User-friendly interface
- Support for various stablecoins
Pros of Curve Finance
- Superior liquidity and efficient stablecoin swaps
- User-friendly interface and intuitive navigation
- Support for various stablecoins, catering to diverse user needs
- Commitment to continuous development and innovation
Cons of Curve Finance
- Narrow focus on stablecoin swaps, limiting its overall application
- Limited scope beyond stablecoin trading
Let’s now go through a table that represents a comparative discussion of these five DeFi lending platforms:
The decentralized finance (DeFi) ecosystem continues to evolve rapidly, offering innovative solutions to traditional financial services.
The five platforms discussed above represent prominent examples of DeFi, each with unique strengths and applications.
As the DeFi ecosystem matures, these platforms are expected to play an increasingly crucial role in shaping the future of finance.
How to Choose a DeFi Lending Platform?
Choosing a DeFi lending platform requires careful consideration to align with your financial goals and preferences. In the dynamic decentralized finance space, thorough research is essential before committing assets.
Consider the following factors:
- Security and Audits: Prioritize platforms with rigorous security audits and transparent security practices to minimize risks.
- Reputation and History: Choose platforms with a strong reputation and a positive history in the DeFi community. Research the team, partnerships, and user reviews.
- Interest Rates: Compare interest rates for lending and borrowing, but exercise caution with excessively high rates, which may indicate higher risks.
- Collateral Requirements: Understand borrowing collateral requirements, noting variations in terms among different platforms.
- Liquidity and Volume: Opt for platforms with high liquidity and trading volumes for a healthier and more active ecosystem, ensuring accurate interest rate calculations.
- User Experience: Evaluate the platform’s user interface for convenience and efficiency in lending and borrowing.
- Community and Support: Engage with the platform’s community to gather insights, opinions, and assess the level of support available.
- Innovation and Features: Look for platforms offering innovative features like flash loans, automated yield farming, or cross-chain lending to enhance your DeFi experience.
- Regulatory Compliance: Stay informed about regulatory developments in the constantly evolving DeFi ecosystem. Platforms complying with regulations provide a wider range of choices for users.
What is the Future of DeFi Lending?
DeFi lending has experienced remarkable growth recently and is poised for continued expansion in 2024 despite emerging challenges.
While promising opportunities abound, certain issues with flash loans, prone to suspicious activities, have surfaced, revealing vulnerabilities in DeFi loan processing.
Despite technological advantages, the industry grapples with financial breaches and security concerns, with anticipated upgrades in the pipeline.
Technological advancements, particularly in DeFi lending, are set to transform how individuals and organizations engage with financial options, fostering user-friendly systems and financial freedom.
Final Words
Despite risks, the decentralized nature, transparency, and innovative features of DeFi lending and borrowing continue to attract users worldwide.
As 2024 unfolds, advancements like Ethereum 2.0 aim to address challenges, fostering further growth. Embrace the financial revolution with DeFi lending and navigate the evolving landscape.
For expert guidance in developing your DeFi platform, turn to Core Devs – Your key to unlocking decentralized financial possibilities.
Explore the future with us!
Frequently Asked Questions about DeFi Lending and Borrowing
1. What is DeFi lending and borrowing?
Decentralized finance (DeFi) lending and borrowing is a system of borrowing and lending cryptocurrency without the need for a central authority, such as a bank or financial institution.
This is made possible through smart contracts, which are self-executing contracts on the blockchain.
2. What risks are associated with DeFi lending and borrowing?
DeFi lending and borrowing come with various risks, including:
- Smart contract vulnerabilities
- Market volatility
- Liquidity risks
- Platform-specific risks.
Users should be aware of the potential for smart contract exploits, price fluctuations, and the overall security of the DeFi platform they choose.
3. How do I choose a reliable DeFi lending platform?
When selecting a DeFi lending platform, consider factors such as:
- Security audits
- Community reputation
- The track record of the development team
- Supported assets
- Interest rates, and
- Overall user experience.
Conduct thorough research and start with a small investment to mitigate potential risks.
4. What are the collateral requirements for DeFi borrowing?
DeFi borrowing often requires users to provide collateral in digital assets to secure the loan. The collateral’s value is assessed using a loan-to-value (LTV) ratio. If the collateral’s value falls below a certain threshold, liquidation may occur to cover the outstanding loan.
5. What are some of the DeFi lending protocols?
Some popular DeFi lending protocols include Aave, Compound, Maker, and dYdX. These protocols allow users to deposit and borrow a variety of cryptocurrencies, including Ethereum, Bitcoin, and stablecoins.
6. How do I get started with DeFi lending?
To start with DeFi lending –
- You will need a cryptocurrency wallet that supports smart contracts.
- You can then connect your wallet to a DeFi lending protocol and deposit your cryptocurrency into a lending pool.
- You can then borrow funds from the pool and repay the loan with interest.
