Crypto Lending 101 — Earn Yield on Your Holdings

Overview

Crypto lending lets you earn interest by lending your digital assets to borrowers through centralised or decentralised platforms. Understand the risks, reward mechanics, and due diligence needed. Before depositing, explore the lessons from the 2022 lending crisis so you can avoid the mistakes that cost billions. If you're new to DeFi, start with our guide to Aave, Compound, and other protocols for a solid technical foundation. For a lower-risk entry point, consider our stablecoin yield strategies that minimise price volatility.

Key Takeaways

• CeFi lending: deposit with a platform (Nexo, Aave CeFi), they manage lending. Higher rates, higher counterparty risk.
• DeFi lending: deposit into smart contracts (Aave, Compound). Non-custodial but smart contract risk.
• Yields come from borrower interest payments — if borrowers aren't paying, yields aren't sustainable.
• The Celsius and BlockFi collapses showed that CeFi platforms can fail — never lend more than you can afford to lose.

Practical Tips

• Split lending across 2-3 platforms to reduce single-platform risk.
• Verify lending rates make economic sense — unsustainably high rates (20%+ on stablecoins) are red flags.
• DeFi lending is transparent: check utilisation rates and collateral ratios on-chain before depositing.