Lending vaults are smart contract-based protocols in decentralized finance that allow users to deposit digital assets to generate yield by providing liquidity for loans. These vaults often automate lending strategies, pooling assets from multiple users to facilitate borrowing and manage associated risks. They offer a structured method for asset holders to earn passive returns.
Context
Lending vaults represent a fundamental component of the decentralized finance ecosystem, offering alternatives to traditional borrowing and lending services. Discussions frequently involve the security of the underlying smart contract code and the potential for impermanent loss or liquidation risks. Future developments include more sophisticated risk management models and cross-chain lending capabilities.
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