An Introduction to Crypto Loans

Savings and loans are the two most common features of traditional banks for everyday life. Savings means lending money to banks and paying lenders the saving interest as an incentive method. On the other hand, people can borrow money from banks after providing collateral so that the borrower has a sufficient budget to make a purchase. For example, a person can offer a property as collateral to apply for a loan to purchase a house. Usually, the borrowed assets come from the savings of the lenders.

Generally speaking, while a crypto loan is a financial service that offers savings and loan features, it can be centralized or decentralized. In this book, a crypto loan is considered a type of DeFi application based on a decentralized blockchain network by utilizing smart contracts, so we also call it a decentralized crypto loan. It allows people to earn interest by depositing cryptos and acquire crypto loans by providing collateral.

In this chapter,...