Top 10 Crypto Lending and Borrowing Platforms in 2024
Lending and borrowing platforms have surged in popularity over the past four years, with more crypto natives seeking capital-efficient products. As of writing, the total value locked (TVL) in DeFi lending and borrowing protocols stands at $33.27 billion. This figure had at one point eclipsed $51 billion, and with the bull market gradually making a comeback, there will likely be increased interest in this DeFi niche again.
The next section of this article will feature the top 10 lending and borrowing platforms, which could emerge as the pacesetters in the next cycle. Some have been around since the 2020 DeFi summer craze, while others are novel innovations designed to solve the pain points that crypto lenders and borrowers experience. Let’s dive in.
Aave is one of the leading decentralized non-custodial lending and borrowing protocols. This DeFi platform allows users to earn passive income or access over-collateralized loans backed by the digital assets they hold. The process is automated by smart contracts, which means there are no intermediaries involved, as is the case in traditional finance.
Notably, the Aave ecosystem features two tokens: the LEND governance token and the AAVE ERC-20 token, which can be staked for interest compounding.
While Aave primarily launched on the Ethereum blockchain, it now supports 12 chains, including Polygon, Avalanche, Optimism, and BNB, among others. Over time, the protocol has become the go-to platform, not only for typical DeFi lending and borrowing but also for flash loans. These are uncollateralized loans that allow users to borrow and repay within the same transaction block, taking advantage of arbitrage opportunities in crypto.
Currently, the TVL within the Aave protocol is well over $10 billion, with loans accounting for half the share of liquidity.
Compound Finance is a pioneering DeFi lending protocol; it was launched in 2018. Since then, the project has rolled out two advanced versions (V2 and V3). The second iteration introduced fundamental features, including the COMP token, which acts as the governance token, and cTokens. Users who deposit their crypto assets, for example, LINK, in turn, receive cLINK, which besides earning interest, can be used across other DeFi protocols as collateral.
It is also noteworthy that the Compound Finance model was updated to a one-base asset in V3, allowing DeFi participants to access USDC stablecoin loans only by depositing crypto collateral in the form of COMP, UNI, LINK, ETH, or other featured liquidity tokens. Another standout functionality of this DeFi lending platform is its algorithmic interest rate adjustment. The underlying smart contracts are designed to automatically readjust the rates based on the demand and supply mechanics.
Compound Finance TVL is currently at $2.6 billion, distributed across four DeFi chains, including Base, Arbitrum, Polygon, and Ethereum.
Unlike typical DeFi lending platforms where over-collateralized loans are the norm, Nolus introduces an ecosystem where users can borrow up to 3x the value of their collateral. The model borrows from the traditional leasing concept, which allows market participants to make a small payment upfront and gain full ownership after repayment. At its core, this approach is designed to enhance capital efficiency in DeFi lending and borrowing.
Additionally, Nolus’ undercollateralized lending offerings reduce the risk of liquidation, which has in the past been a major shortcoming. This DeFi lending protocol leverages smart contract infrastructure to lock the down payment and loan, with both acting as collateral. Furthermore, Nolus features fixed borrower terms of interest throughout the lease contract, providing predictability in yield distributions and future cash flows.
As for revenues, the DeFi leases are estimated to generate an average of 15% APR, 11% of which is allocated to the lenders while the protocol retains 4%.
Maker protocol is famous for its decentralized stablecoin DAI which is pegged to the U.S. dollar on a 1:1 basis. The lending and borrowing ecosystem of this DeFi platform is supported by the DAI stablecoin and smart contracts whose role is to create Maker Vaults.
For a user to access a loan on Maker, they are required to deposit liquidity in one of the vaults; this is usually in the form of a digital asset such as ETH. The locked assets act as collateral, allowing one to generate DAI stablecoins as per the collateralization ratio which is typically 150%. For context, locking $150 worth of ETH would allow a DeFi user to access a DAI loan worth $100.
Besides the DAI stablecoin, Maker features a governance token ‘MKR’ which allows the holders to vote on changes to the protocol, stability fee adjustments, collateral types and other parameters.
This crypto exchange is one of the few centralized platforms that currently offer lending for its users. The lending process as defined on the website is quite seamless; Crypto.com offers collateralized loans in the form of several digital assets, including USD, BTC, ETH, XRP, LINK, DOGE, UNI, MATIC, ENJ, CRV, FLOW, SHIB, EOS. Similarly, users can deposit collateral through select cryptocurrencies such as CRO, LTC, BTC, ETH, VET, LINK, DOT, XRP, USDT, USD, ATOM, BCH, XLM, ADA, ALGO, AVAX.
However, while a relatively straightforward process for crypto users, especially those who prefer to operate on centralized exchanges, there are some nuances which one has to be constantly aware of. For instance, the loan-to-value ratio should always be above 20% to be on the safe side. This means always keeping track of the assets deposited as collateral given the volatile nature of crypto.
Built on the Tron blockchain, JustLend currently enjoys a TVL of $7.33 billion. This DeFi lending protocol introduces a community-powered ecosystem where individuals can access grants or loans.
What further stands out is the ease through which one can launch a campaign and raise funds from family and friends. The process involves a 3-step setup, starting with the creation of a campaign whose main goal is to inform potential lenders of the funds’ purpose. Once the campaign is ready, one can then include the terms of repayment, interest rate and other key metrics. The final step is to invite a community to contribute towards the fundraising efforts.
According to the latest stats by DeFi Llama, over $117 million has been borrowed through this DeFi protocol while the annualized fees from these transactions stands at $4.6 million.
Currently one of the long-standing DeFi protocols, Curve Finance has made a name for itself in stablecoin trading and lucrative liquidity pools. More recently, this DeFi project launched lending smart contracts which will enable DeFi users to leverage the ecosystem for lending their digital assets as well.
While the platform’s UI is yet to be unveiled, veteran crypto users who understand the technicality of smart contracts are already exploring the new lending feature. This debut into the lending foray by Curve Finance signals the growing importance of existing DeFi protocols to add more comprehensive financial products.
It is also a plus for DeFi traders who mostly operate on Curve Finance as they will have more flexibility to tap into the arbitrage opportunities.
This Bitcoin financial services company features several services which have long been a challenge for current and prospective investors. Fundamentally, Unchained Capital offers Bitcoin custodial services through cold storage vaults designed for both individuals and corporate treasuries.
More importantly, users who leverage these services do not have to sell their Bitcoin to access liquidity. Instead, Unchained Capital allows the owners to apply for a loan with their BTC holdings as collateral. Once granted, funds are deposited directly into one’s bank account and the collateralized BTC is transferred to a loan address.
Venus Protocol was initially launched on the Binance Smart Chain (BSC), now BNB Chain, to avoid the high entry fees related to Ethereum’s blockchain transaction costs. The project’s lending and borrowing model is based on algorithmic money markets, focusing on synthetic stablecoins.
Technically, Venus protocol is a fork of Compound and Maker, which explains its combined offering of an algorithmic money market and stablecoin minting capabilities. It also features a multi-chain infrastructure that supports EMV-compatible chains. The decentralized money market is governed through a native token, XVS.
Although a relatively small ecosystem, this DeFi protocol has a TVL of $1.6 billion as of press time.
Last but not least is Avalanche’s Benqi lending protocol. This Web3 platform primarily offers lending and borrowing, alongside a liquid staking feature using the AVAX token.
Similar to traditional markets, Benqi’s lend and borrow feature allows interested DeFi users to earn a passive income by lending out their digital assets. On the other hand, it is also possible to acquire a loan by placing one’s digital assets in Benqi’s liquidity markets to function as collateral.
The current TVL in Benqi is at $290 million while the native token QI has a market capitalization of $99.3 million according to Coingecko.
Conclusion
As mentioned in the introduction, lending and borrowing is still and will likely continue to be one of the hot markets within the crypto realm. However, navigating the intricacies associated with debt acquisition has never been a walk in the park.
Crypto users looking to put their digital assets to use through this market ought to be aware of the risks by tracking metrics such as LTV and the volatility of the underlying collateral. It is also important to select a platform that not only suits one’s needs, but is also safe and secure. The above list may not be exhaustive, and given the pace at which crypto developments launch in a bull market, the best strategy is to keep tabs of the ongoing innovations.
Author
Nik is a content and public relations specialist with an ever-growing interest in Crypto. He has been published on several leading Crypto and blockchain based news sites. He is currently based in Spain, but hails from the Pacific Northwest in the US.