Decentralised Lending Protocols Are Here To Stay - Add These 3 Coins To Your Watchlist

What Is a Decentralised Lending Protocol?

Decentralised lending protocols enable their users to access lending and borrowing services. Typically, they make these services much more simple and accessible than in the traditional financial system.

Getting a loan in the traditional financial system often takes weeks or even months, and is subject to lengthy screenings and administrative procedures to ensure the borrower’s solvency and ability to repay the loan.

Decentralised lending protocols are exempt from such processes, allowing anyone to access their platforms and enjoy their services, which contributed to the dramatic increase in their popularity amongst the crypto community and society at large.

Indeed, imagine living in a country having its national currency down 30% compared to the US dollar, with inflation roaring in the double-digits. In such a scenario, any savings, investments, or loans denominated in that currency would be severely impacted.

For these populations, services offered by decentralised lending protocols are a boon as they allow to easily access crypto-backed loans, providing effective protection against unstable fiat currencies and high inflation.

As such, lending protocols are exclusively associated with decentralised finance, or DeFi, which is built upon the idea of creating an inclusive financial system exempt from traditional intermediaries such as banks or brokerages. This connects individuals directly and in more efficient ways.

How Does a Lending Protocol Work?

The business model of a decentralised lending protocol is quite straightforward and can be understood as two-faced:

1. On one face, lenders can deposit the tokens they wish to lend in specific liquidity pools that are part of the protocol. Once pooled, these assets become available for lending, and lenders can earn interest on the cryptocurrencies when it is borrowed just like a normal bank, only with much fewer intermediaries in the process;
2. The other face is for borrowers. For those who wish to borrow funds, the only necessity resides in depositing a collateral in the form of additional cryptocurrency. The amount of this collateral varies depending on the status of the cryptocurrency collateralized - Bitcoin (BTC) would require lesser collateral than PancakeSwap (CAKE) for instance.

And it’s as simple as that!

However, one notable risk to keep in mind for borrowers is the risk of liquidation: this happens when the cryptocurrency that was deposited as collateral falls under a pre-specified threshold. If that were to happen, the protocol automatically liquidates (i.e. sells) the collateralized assets in order to cover any potential loss. Hence the importance of not choosing an overly volatile cryptocurrency as collateral!

Following are three decentralised lending protocols - two of which have already made a name for themselves in the space, and the last one undergoing its market launch - they all feature their own native currency and can be very interesting investment opportunities!

Aave (AAVE)

Aave (AAVE) is the leading decentralised lending protocol so far.

With nearly $12 billion in total value locked (TVL), it surpasses even the likes of Uniswap (UNI) or PancakeSwap (CAKE), two leading decentralised exchanges (DEXs).

Aave is now part of the exclusive top 50 largest cryptocurrencies, with its native token AAVE now trading around $90, significantly lower than its historical average.

Despite everything, the project is still extremely promising, with a TVL growing by double digits year-over-year, indicating a great moment to buy AAVE at a “discount”!

Compound (COMP)

Compound (COMP) is a project very similar to Aave and another leading decentralised lending protocol.

A bit smaller than Aave in terms of TVL, Compound boasts a TVL of nearly $6 billion, which still makes it the 8th largest decentralised protocol and 3rd largest decentralised protocol, behind Anchor Protocol (ANC) and Aave.

Despite its smaller size, COMP still has a market cap of about $700 million, making it a part of the 100 largest cryptocurrencies, now trading just above the $80 mark.

Compound is therefore a project you certainly want to have on your watchlist if you seek exposure to fast-growing lending protocols.

Mountanaz (MNAZ)

Mountanaz (MNAZ) is the last decentralised lending protocol on this list. Being no match yet to Aave or Compound, Mountanaz is currently in its launching phase and aims to become another leading lending protocol.

Notably, Mountanaz will go the multichain way, meaning that it will deploy on several blockchains at once, which will enable both lenders and borrowers to access the best interest rates at all times.

The Mountanaz ecosystem will feature a native utility token, MNAZ, which will go on presale imminently, definitely keep an eye on this up-and-coming project.

Learn More Here

Presale: https://purchase.mountanaz.io/register
Website: http://mountanaz.io