Unit 2 · Level 3 · Lending & borrowing
Loans without trust
A bank lends you money because it knows your name, your salary, and a court that can chase you. A DeFi protocol like Aave knows none of that: you're just a wallet address. So it flips the deal and makes you lock up MORE value than you borrow. Want €100? Deposit €150 or more of crypto first. If you vanish, the protocol doesn't chase you; it already holds the collateral.
Free to play. No ads, no token, no account needed to start.
What you get asked
Why do DeFi loans demand 150%+ collateral when banks often demand none?
No credit score, no court, no repo man: the collateral IS the enforcement. The buffer above 100% absorbs crypto's price swings before the debt goes underwater.
You deposit €2,000 of ETH as collateral and borrow €1,000 of stablecoins. What is your loan-to-value (LTV), in percent?
€1,000 ÷ €2,000 = 50%. The lower your LTV, the more your collateral can fall before liquidation. Think of it as your safety margin.
In DeFi lending, your ___ is the only thing backing your loan.
The protocol never asks who you are, only what you've locked up. That's why these loans are 'trustless': the code trusts assets, not people.
Match each role in a lending pool:
It's a two-sided market run by code: when nearly everything is borrowed, rates spike to lure deposits in and push borrowers to repay.
You deposit stablecoins into a lending pool and earn 4%. Who is actually paying you?
Same mantra as always: where does the yield come from? Here the answer is honest: borrower interest, minus a small protocol cut. The demand is real, so the yield is real. 🐜
The rest of this unit
Loans with no credit check: just collateral, math, and a liquidation bot watching.