The lending process in DeFi is carried out from the beginning to the end without intermediaries. A coin holder sends the tokens they intend to lend to a pool using a smart contract.  On the DeFi platform, the borrower can obtain a loan, allowing the lender to receive interest upon repayment of the loan.

DeFi interest rates offered for a particular token determines how much money you can earn in APR, which obviously is the passive income for the user.  The APR on the other hand talks about the borrowing cost of the crypto.

For instance, Wrapped BTC earns different interest rates in different protocols for instance, depositing BTC (Wrapped) in compound earns 0.13%, Fulcrum earns 2.02%, Cream 0.1%, CAKE earns 6%, Aave .01%, DDEX earns 0%

So, when it comes to choosing the best DeFi liquidity pool with the best interest rates and other terms users should do their homework and decide in which protocol they want to invest accordingly.

New users need to understand that the APR they can earn for their digital asset whether Ethereum, USDC, DAI, USDT or others depends upon where they are investing it.  The demand for different types of digital assets differs between different liquidity pools.  Also, all liquidity pools do not accept all tokens.  Different liquidity pools support different token types and users need to understand the terms of the pool they are willing to work with.

Defi Lending Is Considered to Be Unique for Passive Income for the Following Reasons:

• Permissionless – Users can lend their digital assets in the DeFi Network of their choice and further to the liquidity pool of their choice depending upon whether they are satisfied with the APR and Other terms.
• Automated – DeFi lending is automated because it is completely executed by smart contracts.  Thus, everything in the Defi liquidity pool is executed according to the code.
• Non-Custodial – Virtually all DeFi lending protocols do not require the users to process the transfer of underlying assets and most of them are automated.
• Secure – Major lending protocols are rigorously audited and thus, the funds supplied to lending contracts are backed by the most robust code in the world.
• Dynamic –Major lending protocols provide variable interest rates, which are automatically adjusted depending upon the supply and demand of any given asset.
• Stress-Free – Interest earned from lending is collected automatically. Thus, end users need not be involved in any kind of maintenance activities to earn a passive income on the most popular cryptocurrencies.

The protocols which are typically Ethereum-based provide the technology to facilitate borrowing and lending, rather than taking custody of clients’ assets and manually managing the operation