Lending Framework

Definition ∞ A lending framework refers to the established rules and structures governing the provision of loans. This system specifies the conditions, collateral requirements, interest rates, and repayment terms for borrowing and lending activities. In decentralized finance (DeFi), lending frameworks are often implemented via smart contracts, automating the loan origination, management, and liquidation processes without traditional intermediaries. These protocols define the operational parameters for capital allocation and risk management within digital asset lending markets.
Context ∞ The development of robust lending frameworks is central to the expansion and stability of the DeFi sector, attracting significant attention in crypto news. Debates frequently concern the security of collateral mechanisms, the transparency of interest rate models, and the potential for regulatory oversight of decentralized lending pools. Ensuring the soundness of these frameworks is vital for managing systemic risk and building user confidence in digital asset financial services.