3 Easy DeFi Lending Platforms That Even Beginners Can Use
Hey folks! DeFi, short for Decentralized Finance, is a subsection of the financial world that relates to the tools, applications, platforms, and services that are built on top of decentralized blockchain networks. The most popular of these blockchain networks to build on is Ethereum, which offers transparency, open-source tech, and financial environments that operate without the need for permissions.
Using DeFi apps (Dapps) allows people to manage and engage with their digital assets (such as cryptocurrencies) without some kind of custodian or administrator needing to be there to provide permissions (this is centralized finance). These Dapps remove third-party controls, allowing you and your digital assets more privacy, anonymity, and the ability to buy, sell, and trade directly with others on peer-to-peer networks.
DeFi enables excellent protocols for borrowing, but it’s the lending aspect that we are going to be zooming in on in this article. Crypto has now evolved beyond buying and selling, with several platforms allowing users to loan out their cryptocurrencies and earn interest on them. DeFi is taking on traditional banking, offering better interest rates than most banks can.
We’ve shined a light on three DeFi lending platforms that even beginners can use, based on their ease of registration, simplicity of service, user interface and overall experience. At the end of this article, you will also find a closing section that explains some of the popular DeFi lending tools that didn’t quite make the list, and why.
Let’s start with…
Which Are The Easiest DeFi Lending Platforms for Newbies?
Aave – Earn interest on your crypto without a hitch
Aave, meaning ‘ghost’ in the Finnish language, set out its intentions from day one to be transparent and open for its users, with no KYC (Know Your Customer) or AML (Anti-Money Laundering) documentation required.
This is an easy-to-use non-custodial money market that is used by both borrowers and lenders. On this platform, lenders are referred to as ‘depositors’, and they are the ones who put their cryptocurrencies into the platform, creating the liquidity needed for the borrowers to borrow. The lending opportunities are then developed by Aave’s team, who present a market to their customers. Equally, for less popular markets, users can create a market pairing themselves thanks to Ethereum, but let’s leave that to more advanced users to worry about.
Here’s what beginners will need in order to start their DeFi lending journey on Aave:
- A reputable web 3.0 wallet (see Trust Wallet, Coinpayments, or BreadWallet)
- Some cryptocurrency to deposit, including, but not limited to:
- An internet connection
Once you have loaded your crypto into your wallet, you will connect the wallet to Aave, which is a painless process, with the site walking you through it step-by-step. Once connected, you head to the ‘Deposit’ page and choose which cryptocurrency to deposit, and how much of it you would like to lend out to earn interest on. A constantly-changing estimated annual interest return will accompany each cryptocurrency that is listed. At the time of writing USDC offers the highest estimated APY at 6.02%. Make your choice, submit your deposit, and that’s it, you’re done. Immediately after the crypto is deposited, lenders start earning interest at a variable rate.
InstaDApp – A Simple DeFi Lending Comparison Portal
InstaDApp is quite different from the other protocols and platforms on this list as it is actually a smart DeFi wallet with the ability to aggregate lending and borrowing information from across the industry. What that means is that most of the great offers you can find on the other DeFi platforms like MakerDAO’s Vault, Uniswap’s liquidity pools, Aave’s portal and Compound, you can instead find in one place. Aggregated information in a single portal allows users, and especially DeFi beginners, to compare the interest rates offered by each platform side-by-side and make better informed decisions.
The founders of the InstaDApp project sought to make DeFi easier for non-technical users and novices by getting rid of much of the confusion that is generated on other DeFi platforms. Beginners are sometimes overwhelmed by the financial jargon and we can’t blame them, talk of overcollateralization, leveraging, interoperability and more makes our head spin. The entry level to DeFi should be as simple to understand and join as Coinbase, and InstaDApp might just be the closest thing going, placing importance on simplicity, minimalism, and clarity in their explanations.
Another consideration that stops many beginners from getting involved in DeFi is the talk of how frequently users switch platforms to jump on the best interest rates. This means having accounts on multiple platforms and learning how each platform transacts with one another. This only adds to user anxiety, so by putting the aggregated data into one dashboard, they’ve negated this issue.
The dashboard, or ‘portal’ as they call it, is very user friendly and simple for beginners. In fact, you could connect your wallet and deposit crypto without having to go through KYC or AML procedures in just the time it takes to boil the kettle. It’s that fast, and not only is it fast, but it’s also presented in an even more aesthetically pleasing way than 95% of the competition.
Dharma protocol – Guaranteed Interest Rates For DeFi Beginners
Dharma is again quite different from the other platforms that we’ve mentioned, namely because their unique selling point (USP) is that they are an open-source DeFi platform designed to tokenize debt. By tokenizing debt, they allow for the creation and trading of digital lending products.
Confused? Don’t be, because the technicalities that work behind the scenes essentially bring you to the same end result. You deposit and lend cryptocurrencies and in exchange you earn interest.
Dharma is great for beginners because everything is laid out very nicely, like the risk level, the negotiating terms, and the interest rates.
The platform helps people to fund loan applications by connecting them through a global order book.
When using Dharma, you can choose to be a Borrower, Lender, Underwriter, or Relayer. As a lender, you will find the platform very simple to use, but be aware that the Dharma protocol is not as versatile as their competitors and only offers cryptocurrencies ‘Dao’ and ‘USDC’. They have also created ‘dToken’ as their native governance token, a sort of internal cryptocurrency that can reward users, enable faster transactions, and allow the platform to stay decentralized.
The key things that beginners need to know are:
- Dharma Protocol is app-based, so you’ll need a mobile phone
- A bank account is necessary as you will have to connect it to their non-custodial wallet (this means you will retain full control of your wallet and its information)
- Daily fiat deposits are limited to $1000 USD
- Users in the US can connect their Dharma account to Uniswap and purchase up to $25,000 of digital assets every week
- The platform can more or less guarantee interest rates of 2.7% APR
Finally, if you’re not sure the platform is entirely credible, let it be known that the Dharma protocol is backed by Coinbase and Y Combinator.
Which DeFi Platforms Are Epic, But Not For Beginners?
Some pretty big names, in truth. We assessed more than a dozen different DeFi lending platforms and some of the following names could well have ended up being featured. So, why didn’t they?
- Compound – This might well be the ‘best’ DeFi lending platform, but there’s so much happening and so much data that it can be overwhelming for beginners
- bZx – An incredibly powerful tool that is more useful in the hands of developers and experienced lenders than with novices
- KittieFIGHT – This niche DeFi lending platform has a gamified approach that is aimed at a particular community and isn’t entirely relevant for outsiders
- Mainframe – This almost made our top three, if only it had launched! We are expecting big things from this lending-focused DeFi platform that is *almost* ready
- dYdX – Powerful, data-driven, but overly complicated for any beginners in the DeFi space
- Fulcrum – Tokenized lending, no KYC, and easy to use. Fulcrum only just missed out on making our top three!
- MakerDao – using their Oasis app, users can treat the platform like a savings account, locking in their loan and earning a savings rate that is decided by the community.
Did we forget to mention your favorite easy-to-use DeFi lending platform? Let us know in the comments below.