Unit 2 · Level 3 · Lending & borrowing
Unit review: the lending gauntlet
DeFi lends to strangers by trusting collateral instead of people: lock €150+, borrow €100. The health factor tracks your distance to the liquidation line, where bots seize collateral instantly, and mass liquidations can cascade into crashes. People borrow for leverage, liquidity, or shorting, all paying interest. Looping stacks borrows into hidden leverage. Nothing here is free; everything here is priced.
Free to play. No ads, no token, no account needed to start.
What you get asked
Why must DeFi loans be overcollateralized?
No identity means no enforcement, so the collateral plays judge, court, and repo man all at once.
When a loan's health factor drops below ___, liquidation bots can strike.
One is the magic line: above it your collateral outweighs the requirement, below it your position is fair game.
Match the unit's big ideas:
Collateral makes the loan possible, the health factor keeps score, and cascades and looping are what happen when everyone pushes the limit at once.
Why do liquidation cascades make crypto crashes worse?
It's a feedback loop: falling prices force sales, forced sales lower prices. March 2020's 'Black Thursday' showed how fast the spiral can spin.
The one habit that keeps DeFi borrowers alive:
The market owes you no warning. Borrow modestly, watch the health factor, and let the maximum LTV be someone else's mistake. 🐜
The rest of this unit
Loans with no credit check: just collateral, math, and a liquidation bot watching.