Money Market
A DeFi money market is a lending and borrowing pool where users supply crypto to earn interest or borrow against collateral.
In crypto, a money market usually means a decentralized finance protocol that lets users lend and borrow digital assets through shared liquidity pools. Instead of matching one lender with one borrower, users deposit assets into a pool, and borrowers take loans from that pool by providing collateral. Interest rates often adjust automatically based on supply and demand: when many people want to borrow an asset, rates tend to rise; when liquidity is plentiful, rates tend to fall.
Money markets matter because they make crypto assets more useful without requiring users to sell them. A holder might deposit stablecoins to earn variable interest, while another user might lock ETH as collateral to borrow a stablecoin for spending or trading. This is similar to a traditional money market account or short-term lending market, but DeFi versions run through smart contracts and can be accessed directly with a wallet. Key risks include smart contract bugs, changing interest rates, and liquidation if collateral value falls too much.
Other terms in DeFi
AMM
An automated market maker is a DeFi protocol that uses liquidity pools and algorithms to price and swap crypto assets without a traditional order book.
Aggregator
A DeFi service that searches multiple protocols to find better prices, routes, or yields for a user’s transaction.
DEX
A decentralized exchange is a crypto marketplace where users trade directly from their wallets using smart contracts instead of a central intermediary.
DeFi
A blockchain-based financial ecosystem that lets people lend, borrow, trade, and earn yield without traditional banks or brokers.