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Ethereum Classic

Aave-DeFi Lending Protocol takes real-world assets as part of the collateral

Decentralized finance functions as a closed system. Owners of cryptocurrencies show their crypto in the form of collateral in order to receive loans in dollar-linked stablecoins and to use them for the DeFi projects. The whole closed loop, however, opened a bit after Aave lending regulations announced that dealing with the decentralized protocol for the financial firm Centrifuge would give SMEs full access to the liquidity available in the crypto market, to bridge loans and use all tokens in the form of collateral.

Crypto investors put around $ 12 billion in Aave loan pools, making the investment the third largest Defi-related project after Total Value Locked. This latest product is designed to enable Aave depositors to generate income with reliable, real-world collateral, and also enables Centrifuge’s issuers to place collateral. From bridging loans to inventory and financing with income, the company is working on income-based financial aid.

Real world for real complex nature

The latest “TradFi” loans are the first steps in what may be a massive expansion of DeFi’s reach; They also add an extra level of difficulty to crypto lenders. Cryptocurrency is used as collateral in a standard DeFi loan. Because these digital currencies are inherently volatile, lenders understand the fundamentals of the crypto market and the specific coin that will be accepted as collateral. When you look at Centrifuge’s collateral categories, it becomes clear that you need skills to analyze all of the risks involved.

DeFi is developed on the basis of smart contracts where all funds are locked at the time of development. Since the crypto owner is pseudonymous in nature, the users only get knowledge of the digital wallet addresses. One of the best parts of crypto transactions is real-time resolutions. ETH blockchain takes around 10 to 20 seconds, but less than Bitcoin’s 10 minutes.

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