What Is Crypto Lending and How Does It Work? | Binance Academy

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Crypto lending gives you the opportunity to borrow crypto for a fee or lend to earn interest. Read more on the mechanics of crypto lending ⤵️

opportunity within one block. For example. Imagine that our primary transaction will take out a 1,000 BUSD flash loan from a DeFi platform and repay it. We can then break this down into smaller sub-transactions:2. You purchase $1,000 of crypto from liquidity pool A .4. You transfer the loan plus borrowing fee into the flash loan smart contract.

If any of these sub-transactions cannot execute, the lender will cancel the loan before it takes place. Using this method, you can make profits with flash loans without any risk to yourself or collateral. Classic opportunities for flash loans include collateral swaps and price arbitrage. However, you can only use your flash loan on-chain, as moving funds to a different chain would break the one transaction rule.

For example, a 50% LTV loan of $10,000 BUSD will require you to deposit $20,000 of ether as collateral. If the value drops below $20,000, you will need to add more funds. If it falls below $12,000, you will beWhen you take out a loan, you'll mostly receive newly minted stablecoins or crypto someone has lent. Lenders will deposit their assets in a smart contract that may also lock up their funds for a specific time. Once you have the funds, you're free to do with them as you wish.

If your LTV ratio becomes too high, you might also have to pay fines. A smart contract will manage the process, making it transparent and efficient. At the repayment of your loan plus any interest you owe, you'll regain your collateral.Crypto loans have been commonly used tools in the DeFi space for years. But despite their popularity, there are some disadvantages.

 

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