2025-08-30
In the traditional lending market, the cumbersome approval process, high intermediary fees, and strict credit thresholds have made many individuals and businesses face financing difficulties With the rise of decentralized finance (DeFi), DeFi lending protocols have emerged. With blockchain technology and smart contracts, it breaks many limitations of traditional lending and achieves a transparent and efficient lending model without intermediaries. So, what exactly is a DeFi lending protocol? How does it work? And what changes will it bring to the lending field?
DeFi lending protocol is a decentralized lending platform built on blockchain technology, which replaces traditional Financial Institutions through smart contracts to achieve direct transactions between lenders and borrowers. Unlike traditional lending relying on intermediaries such as banks and credit companies, DeFi lending protocol relies on the decentralized and tamper-proof characteristics of blockchain to write various links of the lending process, such as mortgage, loan disbursement, repayment, etc., into smart contracts in the form of code. In this system, users can either act as lenders and deposit idle digital assets into the protocol to obtain interest income, or act as borrowers and obtain loans by mortgaging a certain amount of cryptocurrency. The entire process does not require third-party credit review, and the rights and obligations of both lenders and borrowers are automatically executed and guaranteed by smart contracts, greatly reducing the cost of trust and intermediary costs.
The operation of DeFi lending protocol mainly relies on the automated execution of smart contracts. Taking mortgage lending as an example, when a user initiates a loan application as a borrower, they need to deposit cryptocurrency into the smart contract specified in the protocol as collateral. The smart contract will calculate the loanable amount according to the preset collateral rate based on the type and market value of the collateral. After approval, the smart contract automatically disburses the funds to the borrower's account. During the repayment stage, if the borrower repays the principal and interest on time, the smart contract will unlock and return the collateral. If there is a default, the smart contract will automatically liquidate the collateral to protect the lender's rights and interests. At the same time, in order to motivate the lender, the protocol will distribute the interest generated by the loan to the user who deposited the funds in proportion. In addition, some DeFi lending protocols also introduce oracles to obtain off-chain asset price data, ensuring the accuracy of collateral value evaluation and reducing protocol operation risks. HashKey Exchange also pays attention to the innovation of lending protocols when exploring the development of DeFi ecology, and is committed to providing users with more secure and convenient decentralized lending services.
The application scenarios of DeFi lending protocols are diverse. In the field of personal finance, users can quickly obtain liquidity by mortgaging digital assets to meet short-term funding needs. In the decentralized finance (DeFi) ecosystem, lending protocols provide funding support for other applications. For example, users can mortgage the funds obtained from lending to participate in liquidity mining and decentralized transactions, achieving flexible asset allocation and appreciation. In addition, some DeFi lending protocols have also launched Supply Chain Finance services for enterprise users, realizing functions such as accounts receivable pledge financing through smart contracts, and improving the efficiency of enterprise capital turnover. HashKey Exchange closely follows market trends, actively explores the application potential of DeFi lending protocols in different scenarios, and builds a diversified lending service platform for users. However, when participating in DeFi lending, users should pay attention to issues such as collateral settlement risks and smart contract vulnerabilities caused by market price fluctuations, and participate in lending activities with caution.
What is HashKey Exchange?
HashKey Exchange is one of the first regulated cryptocurrency exchanges in Hong Kong to obtain a license from the Securities and Futures Commission (SFC). It supports fiat currency deposits and trading in Hong Kong dollars (HKD) and US dollars (USD), offering users spot trading services for mainstream digital assets including Bitcoin (BTC), Ethereum (ETH), and Tether (USDT). The platform also provides OTC (over-the-counter) services to meet the needs of large-value asset transactions and fiat currency conversion, ensuring more flexible and private trading. To cater to the asset allocation needs of different investors, HashKey has launched the HashKey Earn channel, offering users fixed-term and demand financial products to achieve stable appreciation of crypto assets. The platform holds ISO 27001 and 27701 security certifications, employs a 98% cold wallet storage mechanism, and incorporates security measures such as two-factor authentication to provide users with a stable and reliable trading environment.
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