Port of DeFi Network introduces the DeFi loan agreement, which is used for investors to borrow Ethereum tokens without friction by using real-world assets, enabling the digital currency market to function and creating a secure method of storing assets with positive returns.
Before understanding decentralized financial lending, we should first understand the definition of borrower and lender. Borrower and lender mainly refer to those parties who borrow and those that lend, hence the term borrower and lender. Decentralized lending refers to the behavior of matching the borrower and the lender through a centralized lending agreement, and then transferring the assets and completing the borrowing and lending immediately after the mortgage and pledge are confirmed.
The decentralized lending agreement provides the technical basis for standardization and interoperability of the platform and plays a role of security management in the lending process. Compared with the traditional lending mode, decentralized lending mode has the following advantages:
1）The combination of fiat currency loans and digital asset loans (a stable currency mode can be regarded as the combination of fiat currency and digital assets).
2）Collateral based on digital assets.
3）Real time transaction settlement is realized through automation, and the actual cost is reduced.
4）Replacing credit checks with an overcollateralization model, which also means that more people can be served who do not have access to traditional services.
Decentralized lending platforms commonly use a form of "collateralized lending": the borrower is required to pledge assets worth more than the loan as collateral to ensure that the lender has access to the collateral in the event that the debt cannot be repaid. The business process for a mortgage loan is as follows: