A decentralized lending market operates on blockchain technology, enabling users to lend and borrow digital assets without intermediaries like banks. These markets use smart contracts to automate loan agreements, collateral management, and interest rate determination. Participants can earn interest by supplying liquidity or obtain loans by providing collateral. This system promotes financial inclusion and transparency.
Context
The state of decentralized lending markets is a prominent topic in discussions about the future of finance and the growth of decentralized finance. A key debate involves balancing user autonomy with risk management, particularly concerning collateral requirements and liquidation protocols. Critical future developments include innovations in undercollateralized lending and enhanced risk assessment models to broaden participation while maintaining system stability.
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