Crypto lending,
from A to Z.

The rate of return on a deposit over a year, including the effect of compounding. In DeFi lending, APY for depositors typically fluctuates with pool utilization rather than staying fixed.

An asset a borrower locks up to secure a loan. If the borrower doesn't repay, the collateral can be seized or liquidated to cover the debt.

The relationship between the value of collateral posted and the amount borrowed, usually expressed as a percentage (for example, 150% collateral ratio means collateral worth 1.5x the loan). See how DeFi lending works for how this ratio drives liquidation.

The forced closing of a loan position when its collateral ratio falls below a required threshold. A third party (or automated system) repays part or all of the debt in exchange for a discounted portion of the collateral.

A shared pool of deposited crypto that borrowers draw from and lenders earn interest from, replacing the need for a one-to-one match between a specific lender and borrower.

A mechanism that brings real-world data, most commonly asset prices, onto a blockchain so smart contracts can use it. Lending protocols rely on oracles to value collateral for liquidation decisions.

A lending model where borrowers post collateral worth more than the loan amount. This is the dominant model in DeFi lending because it doesn't require identity verification or credit checks. See overcollateralized vs undercollateralized crypto loans for a full comparison.

A lending model where the collateral posted is worth less than the loan amount, or where little to no collateral is required at all, typically relying on credit scoring, reputation, or a trusted intermediary instead.

The percentage of a liquidity pool's total deposited funds that are currently borrowed out. Interest rates in most DeFi lending protocols adjust automatically based on utilization.

Self-executing code deployed on a blockchain that automatically enforces the rules of an agreement, such as a loan's terms, without a human intermediary managing it directly.

The total value of assets currently deposited in a protocol. Often used as a rough measure of a protocol's scale and adoption, though it doesn't by itself indicate safety or risk.