Lending refers to the act of providing digital assets to borrowers in exchange for earning interest on the lent amount. It is a way for individuals or entities to earn passive income by lending out their digital assets to borrowers who require them for various purposes, such as trading, liquidity provision, or short-term funding.

Digital asset lending typically takes place through lending platforms or protocols that operate on blockchain networks. These platforms establish a connection between lenders and borrowers, streamlining the borrowing and lending process by utilizing smart contracts. Lenders deposit their digital assets into the lending platform, and borrowers can then borrow these assets by offering collateral or fulfilling other requirements.

The lending terms, including interest rates, loan durations, and collateral requirements, are determined by the lending platform or protocol. Interest rates can vary based on supply and demand dynamics, collateral quality, and other factors.

Digital asset lending provides benefits for both lenders and borrowers. Lenders can seize the opportunity to earn interest on their idle digital assets, potentially generating a passive income stream. Borrowers, on the other hand, can access additional liquidity without the need to sell their existing digital asset holdings, which allows them to maintain their long-term investment positions or execute specific trading strategies.