Lending and borrowing in Web3 are financial services that happen on the blockchain without traditional banks. In Web3, people interact directly with smart contracts instead of using centralized financial institutions. These contracts are coded agreements that automatically manage funds based on rules that everyone can see.
With Web3 lending, a lender can deposit their crypto into a smart contract and earn a return over time. This return is usually paid by borrowers. On the other hand, borrowing allows a borrower to take out a loan by providing crypto as collateral. The system holds this collateral until the loan is repaid. This entire process is automated and does not require trust in a company or person. Instead, traders trust the code and the network it runs on.
Key Takeaways
- Web3 lending lets you earn or borrow using crypto without a bank.
- You must use your crypto as collateral to get a loan.
- Smart contracts handle everything automatically and securely.
How Lending Works
To lend crypto, lenders deposit their tokens into a protocol like Yamfore, etc. These protocols pool the deposits and make them available to borrowers. In return, lenders receive a percentage of interest on what they deposit. The interest rate changes based on supply and demand. If more people borrow, interest rates go up. If more people lend, rates go down.
Lenders always have the option to withdraw their funds, unless those funds are actively being used for a loan. In some protocols, funds are available at any time. In others, they may be locked for a fixed period.
How Borrowing Works
To borrow funds, traders must first lock up some of their own crypto as collateral. This is to make sure the loan gets paid back. The system calculates how much a person can borrow based on the value of their collateral.
For example, if a trader deposits $1,000 worth of crypto, the system might allow them to borrow $500 in a stablecoin. This is called overcollateralization. It protects the protocol from risk if the value of the collateral drops.
Borrowers then receive the loan and can use it however they want. To get their collateral back, they must repay the loan. If the collateral loses too much value, some protocols automatically sell the collateral to repay the loan. This is called liquidation.
However, not all Web3 lending platforms do this. Some newer systems, like Yamfore, do not have liquidation or margin calls. Instead, they charge a fixed fee, and users repay when they choose.
What Is Yamfore?
Yamfore is a decentralized lending protocol built on the Cardano blockchain. It allows traders to borrow a stablecoin called USD by locking up ADA as collateral. It is a non custodial system, meaning that traders keep full control of their funds. No banks or third party services are involved. Everything runs on smart contracts.
The goal of Yamfore is to offer a simple and flexible way to borrow and lend crypto without the common risks seen in other platforms, such as liquidations and ongoing interest payments.
How Borrowing Works on Yamfore
To borrow with Yamfore, a borrower needs ADA, which serves as collateral, and CBLP, Yamfore’s token used to pay a one time loan fee. The borrowing process follows a clear sequence.
First, the borrower locks their ADA into a smart contract. This action secures the loan and protects the protocol from default.
Next, the borrower pays the required loan fee using CBLP tokens. Without this fee, the protocol does not process the loan.
After receiving the fee and confirming the collateral, Yamfore issues a fixed amount of USD, a stablecoin to the borrower.
At the same time, the protocol creates two tracking tokens. It locks one of them with the ADA collateral, and it transfers the other to the borrower. These tokens confirm the loan’s validity and link the collateral to the loan.
Unlike many other platforms, Yamfore does not enforce a repayment schedule. Borrowers face no deadlines or interest. They can repay the USD whenever they choose. Once they repay the full amount, the protocol unlocks the ADA and removes both tracking tokens from the system. This design gives borrowers flexibility and control while maintaining security through smart contracts.
Yamfore removes some of the biggest stress points from other lending platforms. There are no margin calls, so if ADA’s price drops, your loan stays safe. There is also no ongoing interest. You only pay a one time fee when you borrow. You don’t need to rush to repay or manage interest over time.
CBLP Token and Its Role
CBLP serves as the utility token within the Yamfore protocol. Every borrower must acquire CBLP before initiating a loan. There are a few ways to get CBLP. First, borrowers can purchase it from a decentralized exchange. Second, they can use Yamfore’s built in exchange feature to convert other assets.
Borrowers use CBLP to pay the fixed borrowing fee. This is its main function. The token does not serve a purpose in speculation, staking, or earning rewards. Yamfore designed CBLP specifically to support loan processing and maintain protocol operations.
What You Should Remember
Web3 lending and borrowing are important because they give people more control over their money. Traders do not need permission from banks. They do not need to fill out forms or pass credit checks. Everything is handled by smart contracts on the blockchain.
It also opens up financial access to people around the world. Anyone with an internet connection and a crypto wallet can use these services. At the same time, users must be careful. Prices of crypto assets can change fast. Smart contract bugs can cause problems. And if oracles give wrong price data, the system might make incorrect decisions.
