Why Is P2P Lending an Accomplice of DeFi’s Liquidation?

DeFi has seen frequent liquidations recently and the term ‘P2P lending attack’ was born at the same time. It seems that P2P lending has become a major weapon for hackers in their attacks. Therefore, what is P2P lending and how do we feel about it rationally？

Asset mortgage is not necessary for P2P lending. Instead, it only requires the lending and repayment to be completed in the same block. As a result, this process is less time-consuming, thus hampering investors to operate.

As a great innovation in smart contracts, P2P lending minimizes the cost of using capital because tiny commissions are needed for handsome profits during the business with the absence of pledged assets.

P2P lending is often used for many purposes, including an arbitrage based on price differentials among tokens on different trading platforms, the decrease in liquidation expenses caused by asset mortgage, and the change in mortgages. It can help traders maximize their returns when their assets are occupied.

The reason for hackers using P2P lending to attack DeFi is that the amount of capital that can be loaned is unlimited. However, as for P2P lending itself, it is a creative financial application that deserves to be paid attention to continuously.

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