Money markets are one of the few market verticals that have found organic demand and managed to find product-market fit in crypto. Without lending protocols, DeFi would be severely limited. Lending and borrowing protocols allow users to passively earn yield on their deposits, and gain leverage on an asset by providing it as collateral and borrowing against it, hedge positions, or short-sell assets.

However, they are also one of the most complex codebases to build and design from a risk management perspective. Not only do they have to deal with timely and proper incentives liquidations, but they also must manage a large series of parameters, perform frequent risk assessments for collateral assets, regularly monitor and update critical parameters… All of this gets even more complicated when dealing with DAOs and overseeing highly specialized quantitative tasks in a decentralized setting.

Permissionless lending/borrowing is and will continue to be a killer use case for DeFi. In this context, the network effects and resilience of the oldest protocols, Aave and Compound, have helped them stand out against competitors and retain market share, even reaching a state of profitability and removing all sorts of liquidity mining incentives (although not fully in the case of Compound). Even though some protocols like Euler managed to gain some market share in the past they never really disrupted the market leaders, even with incentives and offering highly leveraged strategies.