DeFi Lending Protocol: the advantages of decentralized finance

Folks Finance
4 min readOct 14, 2021


In the world of Decentralized Finance, the DeFi lending protocol is an innovation that allows anyone, anywhere, to obtain capital or earn interest on their digital assets instantly and without any slow bureaucracy.

Lending has always been one of the pillars of the financial system, involving individuals, businesses, private financial institutions, and banks. The latter not only offer this service to their customers but also require it in turn to meet their liquidity requirements.

Compared to centralized finance (or CeFi) and traditional finance (TradFi), DeFi money markets provide the technology to facilitate lending activities. Indeed, rather than taking custody of clients’ assets and manually managing the transaction, these protocols allow users to interact in a peer-to-peer manner.

The fascination of DeFi capital markets protocols, where Folks Finance aims to be a protagonist actor, is expanding so much that it’s also starting to appeal to banks. In fact, earlier this summer, Swiss bank Sygnum decided to support the suite of decentralized yield-generating products.

Not only that, with decentralization, users have complete control over their funds. Thanks to smart contracts, operating on permissionless blockchain solutions, and automating processes, there is no need for financial intermediaries as in CeFi, (i.e., Nexo or Celsius).

The DeFi philosophy

The DeFi philosophy was born in 2015 when the deployment of smart contracts on Ethereum made it possible to manage transactions that automate pre-conditional agreements between parties.

It is a true evolution of blockchain, the trustless-based peer-to-peer technology. In fact, DeFi exists to disintermediate traditional and centralized financial models by allowing anyone with an internet connection to participate freely.

Banks, brokers, and centralized crypto intermediaries, which introduce inefficiencies into the system, are being replaced by algorithmic rules that allow trustless interactions between users. In this way, blockchain technology enables them to buy, sell, lend, and borrow more efficiently and economically.

In recent years, DeFi applications have proliferated at a rapid pace. According to data reported by Defi Pulse, DeFi lending protocols generate over $650 million in annual interest. At the time of writing, Aave dominates the scene with 64.% of dominance, followed by Compound and Maker.

While these numbers are still minuscule compared to the traditional credit market, DeFi remains one of the most promising expanding financial sectors.

DeFi vs. CeFi: what are the advantages of decentralized lending

First, DeFi revolutionizes CeFi by introducing the concept of disintermediation. CeFi platforms are typically owned by companies that take custody of deposits and use them as capital for their investment (similar to traditional financial institutions). Indeed, as mentioned, with DeFi, smart contracts and dApps replace central entities for providing the financial services allowing the users to keep control of its funds.

In this way, decentralized financial protocols eliminate the slow, unethical, and expensive bureaucracy of the centralized system. The only exceptions could be KYC (Know Your Customer) and AML (Anti Money Laundering) required to comply with some countries’ regulations.

Moreover, in contrast to CeFi, access to permissionless blockchains makes transactions transparent and efficient. In fact, these are all traceable and publicly viewable in the distributed ledger.

Another advantage of the DeFi world for lending protocols is lowering the barriers to entry, attracting more players to the market. Furthermore, contrary to traditional finance, where yields are higher for larger capital, in DeFi, any user benefits from the same high APY, regardless of the amount invested.

In terms of security, decentralized applications and all locked funds depend on the reliability of the code underlying the protocol itself. In practice, smart contracts, once deployed, will always operate as they were written. For this reason, there are specialized companies that audit smart contracts to detect any vulnerabilities and verify the trustworthiness of the contracts and their interactions with each other.

Folks Finance: Algorand DeFi Lending Protocol

In the DeFi capital markets protocols, Folks Finance chooses Algorand technology as a decentralized, fast, scalable, low-cost, and secure infrastructure. The permissionless Pure Proof-of-Stake (PPoS) Algorand Layer-1 blockchain is optimal for building decentralized financial applications.

Folks Finance’s goal is to become the mainstay in the lending industry, collaborating with the Algorand growing DeFi ecosystem to expand into a new era of the decentralized, borderless economy.

At the time of writing, Folks Finance is undergoing security audits to ensure the security of the code underlying the protocol and its technology.

With a user-friendly, functional, and intuitive interface, the protocol will allow non-crypto experts to easily access decentralized financial services globally and at a low cost.

The protocol offers reliable decentralized financial services: lending, borrowing, staking, incentives, and much more.

Since Algorand blockchain fees are close to zero, the user can perform compounding of profits every day or more, resulting in higher yields for lenders.

Being Folks Finance decentralized and incentivized to be owned by the community, by interacting with the protocol, the users can earn the FOLKS governance token that can be used to participate in the governance system of the lending protocol.



Folks Finance

DeFi at its finest: lend, borrow, trade, and manage digital assets all in one place.