A DeFi Lending and Borrowing platform represent a Next-Gen bank that uses blockchain technology and smart contracts to provide its services.
The list of advantages offered by a Decentralized Finance Lending and Borrowing platform
All the transactions executed are recorded in an immutable distributed ledger and this helps in real-time fund management by the users.
Loans can be availed by borrowers without submitting a valid credit score or undergoing a cumbersome documentation process.
There are no middlemen like brokers or agents present in the platform. This enhances operational efficiency and also cuts down various overhead costs.
Flexible terms and conditions are available for the borrowers with all the details present in the transparent and robust smart contracts.
The risk of loan default by the borrowers is significantly reduced due to the presence of collateral that financially covers them in case they fail to repay credit on time to the lender.
It helps the unbanked sections of the population to easily access low-cost financial services as they have been completely isolated by the traditional financial system.
It ensures a high level of price and capital efficiency and is fully resistant to transaction censorship by authorities.
DeFI Lending and Borrowing platform development are already being pioneered by Aave, InstaDApp, Dharma, and Maker. Issues like over-collateralization of loans and scalability concerns of blockchain technology need to be solved to ensure rapid growth in the future.