DeFi lending and borrowing platform development rank among the top five projects in the blockchain industry. There is an immense interest in developing these solutions and companies are looking into DeFi lending platform development. This article tells you how to develop your DeFi lending & borrowing platform using the best practices.

➤The working model of DeFi lending protocols

Recently, financial services underwent significant changes to their operations. The introduction of blockchain technology lets developers solve the problems of traditional financial systems. At the front of these innovative solutions is DeFi, a concept that provides a new perspective on financial management. Lending and borrowing platforms rank among the most popular types of DeFi projects. This popularity is thanks to the benefits they provide over centralized platforms. Let us first look at the working model these platforms use before looking at the benefits.

The DeFi lending protocols are where users can lend and borrow crypto assets. A traditional system is where the platform gives a loan to the borrower. However, here, the platform enables P2P lending between network participants and removes any need for third-party involvement. The platform allows lenders to earn interest for lending their crypto assets. Also, the platform provides a chance for long-term investors to earn high-interest rates. Hence, the borrowers and lenders can benefit from the DeFi lending protocol.

A notable advantage to DeFi lending protocols is that anyone can become a lender and earn interest. Additionally, users can become a borrower by signing up to the platform and connecting their digital wallets.

The working model followed by these sites is as follows,

• The borrower initiates the process by depositing crypto assets as collateral

• The site disburses loans through self-regulating smart contracts

• The borrowers pay a different interest rate for borrowing cryptocurrencies

• The interest the borrowers pay goes to the lenders

And that is how these platforms work. Now that you know about the working model, it is time to look at the benefits provided.

➤Benefits to DeFi lending platform development

Better borrowing speed

The Smart contracts on DeFi platforms mean that users quickly get their loans. The only requirement for users is to connect their digital wallets to the site and make a request. The lack of third-party involvement here streamlines processes and fast tracks the loan approval process.

No intermediaries

Smart contracts are autonomous protocols that activate without any oversight. Through smart contracts, lenders and borrowers can establish agreements. The lack of third-party oversight speeds up the process of loan issuance. Now borrowers can borrow at low-interest rates while lenders earn high returns.

Permissionless

DeFi platforms are transparent and open ecosystems where anyone with a crypto wallet can join. There is no geographic limitation or credit history requirement here. A user can become a lender or borrower by meeting the platform’s requirements.

Transparency

These platforms have a high transparency level and maintain user trust. The DeFi lending platforms operate on blockchain technology and allow users to see the smart contract code and how the system functions.

Control over crypto assets

It should not surprise anyone that some centralized platforms are open to hacker attacks or system errors. Here, the users retain control of their assets and take the required steps to protect their data.

The paragraphs above indicate the several benefits to DeFi borrowing platform development. You might be seeing this and want to develop your DeFi lending and borrowing platform too. A successful DeFi platform is one that’s equipped with several essential features. Listed below are those features.

➤Necessary features required during DeFi lending and borrowing platform development

First and foremost, users must have a crypto wallet before they can start using the site. Hence, it is essential to list out the types of wallets the site supports. Decide which integrations your site requires before proceeding. Here are the essential features.

Flash loans

Flash loans are an example of lending without collateral. This feature gained popularity with the rise of DeFi lending platforms. Here, the user can borrow money without providing collateral. However, these loans have a limited duration and are automatically canceled if the user cannot pay within the time limit. Smart contracts regulate the process and do not allow fund transfer if the conditions are not met. Hence, the borrower must pay off the loan and complete the transaction. If not, the smart contract cancels the loan.

Rate switching     

The crypto asset market is volatile by nature. Hence, users can appreciate a rate switching feature. Here, users can switch between stable and variable interest rates and protect themselves from sudden market movement. This feature provides some stability to borrowers when borrowing.

Fiat gateway

This feature enables users to purchase digital assets with fiat currencies. That way they are not overwhelmed by the site’s complexity and head to a third-party site. This feature improves the user experience and meets the customer’s requirements. Additionally, it simplifies the onboarding process for new users.

Investment rewards

One way to motivate users to provide funds for borrowing is to give them reasonable investment rewards. Lenders see these platforms as an opportunity to earn passive income from crypto assets. Consider developing several reward strategies for lenders and encourage them to make long-term investments on the site.

➤The DeFi lending and borrowing platform development process

1. Discovery phase

This step is where you build the business logic for the product. Here, the business analysts identify and describe the primary objectives of the project, define the core features and create an overall sketch. This information forms the foundation of everything that comes next. Statistics indicate that this phase helps users optimize the budget and reduce project risks.

2. UX and UI design

Many users often cite the user experience as a weak point for DeFi apps and hence, they move to centralized platforms. Here, you must work with veteran UX and UI designers who can create a functional and intuitive user interface.

You can partner with a DeFi lending platform Development Company with an in-house design department.

3. Develop the product

This process is where you put the platform’s logic and operations into smart contracts. These are self-executing protocols that activate under specific conditions. Here, you implement the mechanism for interest calculation, the credit pool type, the investment rewards mechanic, etc.

Smart contract development requires developers with sufficient blockchain expertise. Ensure the contracts have no glitches or flaws in the code. Next, ensure the smart contract remains flexible and functional. Finally, consider gas optimization as it can make or break a platform’s success.

4. Test and launch

The DeFi platform is a transparent and open system with top-tier security protocols. The testing phase is where you ensure the system works as required. Here, you find if the site has any vulnerabilities or flaws. This phase is where an experienced testing team comes into play. They analyze the product from start to finish and look for any weaknesses that hackers can exploit.

Following the testing phase, you have a complete and ready-to-launch product. Now, you conduct several marketing plans to ensure the site launches to a significant audience. Post-launch, ensure that you have a dedicated customer support network that can clear any doubts the users have.

Conclusion

DeFi is a revolutionary concept that quickly rose to popularity. DeFi lending and borrowing platforms provide several benefits that users can’t get enough of. Every day, companies and businesses are looking to develop their DeFi lending protocols and reap the rewards. Hence, if you want to tap into this lucrative industry, then now is the time to do it. Find the right company that can help you develop your DeFi lending & borrowing platform.