Lending & Borrowing
Wildly popular recently, several Decentralized Finance (DeFi) protocols allow you to lend out your cryptocurrencies without requiring a middleman (Compound or Aave). Instead, a smart contract would be used to ensure that the loan would be handled correctly. This smart contract will automatically make transactions if certain predetermined conditions are met.
When lending crypto, your assets are no longer in your possession: you are sending them to a smart contract. What you’ll get in returns are bonds that prove you are the owner of these lended assets.
Security is of course a concern here. In case of the most well known DeFi lending protocols, its smart contracts are well audited and public so that everyone can verify it manually. While that won’t exclude potential vulnerabilities, it does give some form of reassurance.
Unfortunately for DeFi, its smart contract operations means that it’s limited to a single blockchain. Therefore, the options as to which crypto you can lend are usually limited. Most often, it only concerns ERC20 tokens (running on the Ethereum blockchain).
Kimochi Finance's Lending & Borrowing product was born to solve this problem.