On-Chain Lending for Beginners: Lend and Borrow in DeFi
DeFi lending protocols let you earn interest on deposits and borrow without credit checks. Here is how to get started safely.
On-chain lending lets you deposit assets and earn interest (as a lender), or post collateral and borrow assets (as a borrower). Unlike traditional lending, there is no credit check, no approval process, and no fixed term — just overcollateralised loans managed automatically by smart contracts.
Lending: How to Earn Interest
- Deposit USDC, ETH, BTC, or other assets into Aave, Compound, or via Steyble
- Your deposits are pooled with others and lent to borrowers who post collateral
- You earn a share of the interest paid by borrowers — rates fluctuate with supply/demand
- Withdraw any time (subject to available liquidity in the pool)
- Receive aTokens (Aave) or cTokens (Compound) representing your deposit + accrued interest
Borrowing: How to Access Liquidity Without Selling
- Post ETH, BTC, or stablecoins as collateral (typically 75-80% LTV for stablecoins, 70% for ETH)
- Borrow USDC or other supported assets up to your collateral limit
- Pay variable interest on the borrowed amount — check current borrow rate before borrowing
- If collateral value falls below maintenance ratio, position is liquidated — monitor carefully
- Use cases: access USDC liquidity without selling ETH (taxable event), leverage, yield-on-yield strategies
Getting Started via Steyble
Steyble's DeFi lending interface shows current supply APY and borrow APR for each asset, lets you deposit or borrow in one tap, and monitors your health factor — a single number showing how far you are from liquidation (1.0 = liquidation, 2.0+ = safe). Start with lending USDC for yield before exploring borrowing — borrowing adds leverage and liquidation risk that requires more experience to manage safely.