Lending Protocol
DeFi's money markets: deposit assets to earn interest, or borrow against collateral — all governed by code, no bank.
A lending protocol (Aave and Compound are the archetypes) lets users deposit assets into a shared pool to earn interest, while borrowers take loans against collateral they lock up. Interest rates float algorithmically with the utilization rate — the busier a pool, the higher the yield and borrowing cost.
Loans are over-collateralized: you must deposit more value than you borrow, because there is no credit check and no recourse — only code. If your collateral’s value falls too far, it’s automatically liquidated. This is why DeFi lending powers leverage and shorting more than it powers everyday credit.