What is Lending Pool?

Lending pools are a type of liquidity pool designed to facilitate peer-to-peer (P2P) lending. When borrowing from a lending pool, users must provide ample asset collateralization. For example, if the collateralization ratio to borrow against USD coin (USDC) is 200%, and the user supplies $1,000 USDC, the user would be unable to borrow more than $500 USD. In turn, users who lend their assets are rewarded with a certain percentage of the total amount they lent. Smart contracts automate the lending and borrowing process with different predefined lending rates depending on the assets and protocols involved.