Money Market Protocol

Definition ∞ A money market protocol is a decentralized application on a blockchain that facilitates lending and borrowing of digital assets. These protocols allow users to supply cryptocurrency to liquidity pools and earn interest, or borrow assets by providing collateral. They operate autonomously through smart contracts, enabling peer-to-peer financial interactions without traditional intermediaries. Such protocols are fundamental components of the decentralized finance ecosystem.
Context ∞ Money market protocols are a dynamic area within decentralized finance (DeFi), frequently featured in news concerning yield generation and liquidity provision. Current discussions often focus on the efficiency of interest rate mechanisms, the security of smart contracts, and the risks associated with volatile collateral. The ongoing innovation in these protocols aims to enhance capital efficiency and accessibility for users globally, while also attracting regulatory scrutiny.