The lending and borrowing system in traditional finance is built on centralized institutions, credit scores, and stringent requirements that exclude large segments of the population. Crypto has challenged this model by introducing decentralized finance, or DeFi, which enables lending and borrowing through smart contracts. DeFi has the potential to reshape credit by removing intermediaries, reducing costs, and making financial services accessible to anyone with an internet connection. This is one of the most significant ways blockchain is changing finance.

DeFi lending platforms work differently than banks. Instead of relying on credit scores, they use collateral đăng ký to secure loans. Users deposit crypto assets into lending pools, which are managed by smart contracts. Borrowers can then access funds by locking collateral, often over-collateralized to reduce risk. This model enables quick access to liquidity without traditional approval processes. For users in regions with limited banking infrastructure, DeFi provides an alternative path to credit, allowing them to participate in global financial systems.

Another major advantage of DeFi lending is transparency. Traditional lending involves complex contracts and opaque fees. DeFi platforms, however, operate on public blockchains where users can verify terms, interest rates, and liquidity. Smart contracts execute automatically, ensuring that lending and repayment conditions are enforced without human intervention. This transparency reduces the risk of hidden fees and unfair practices. It also creates a more competitive lending environment, where users can choose platforms based on clear and verifiable conditions.

DeFi lending also introduces new financial products such as flash loans, where users can borrow instantly without collateral as long as the loan is repaid within a single transaction. Flash loans enable advanced trading strategies, arbitrage, and liquidity management. While innovative, they also introduce risks, as flash loans have been used in complex attacks on vulnerable smart contracts. The growth of DeFi has highlighted the need for stronger security practices and better auditing standards to protect users and maintain trust.

The rise of DeFi lending has also attracted institutional attention. Some financial institutions are exploring how to integrate DeFi into existing systems, while others are launching hybrid products that combine centralized oversight with decentralized infrastructure. The goal is to leverage the efficiency and transparency of DeFi while maintaining regulatory compliance and consumer protections. As DeFi matures, it may become a significant part of mainstream credit markets, offering faster, cheaper, and more inclusive lending solutions.

Despite its promise, DeFi lending faces challenges such as regulatory uncertainty, security risks, and volatility. Collateralized lending can be risky when asset prices fall rapidly, leading to liquidation and losses. Regulatory frameworks are still evolving, and governments may impose restrictions that affect DeFi growth. Nonetheless, DeFi has proven that lending and borrowing can operate outside traditional banking systems. The future of credit may be decentralized, transparent, and accessible, powered by blockchain technology and smart contracts.