How Lending Markets Work

This lesson is for enrolled learners

The concept DeFi lending protocols (Aave, Compound, and similar) are pooled, overcollateralized money markets, not peer-to-peer loans and not credit-based lending. Suppliers deposit an asset into a shared pool and immediately start earning interest, tracked via an ever-increasing index rather than individual ledger entries — your balance simply grows as the index grows, letting the protocol handle millions of depositors……

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