Borrower Incentives

Definition ∞ Borrower incentives are mechanisms designed to encourage individuals or entities to obtain loans within decentralized finance platforms. These often involve offering rewards, such as native tokens, in addition to the borrowed assets. The purpose is to stimulate lending pool utilization and increase protocol activity. Such inducements aim to attract capital and maintain liquidity within the system. They serve as a strategic tool for growth in nascent DeFi markets.
Context ∞ The practice of offering borrower incentives is a prominent feature in the competitive DeFi lending landscape. News often covers how these incentives affect protocol growth, user acquisition, and overall market liquidity. A key discussion point involves the sustainability of such reward structures and their impact on long-term protocol health. Market participants closely monitor how these incentives adjust in response to interest rate fluctuations and regulatory shifts.