Be Your Own Bank
DeFi Lending Protocols
Lending protocols (like Aave or Morpho) eliminate the middleman. In DeFi, there is no bank holding all the money. The liquidity is provided directly by other users.
As a Borrower: You can deposit your ETH as collateral and borrow stablecoins (e.g., USDC) against it instantly.
As a Lender: You can deposit your own crypto into the pool to provide liquidity for others, earning a passive yield from the interest they pay.
Pawnshop & Collateral
Borrowing in DeFi works similarly to a pawnshop. You bring a valuable item as collateral (e.g., ETH) and get a loan in stablecoins. You don't sell your ETH, but if its value drops too much, the pawnshop automatically sells it to recover the borrowed money.
Collateral is the pledge. In a traditional pawnshop, it might be a watch or jewelry. In DeFi, it can be ETH, WBTC, or another token.