Web3 lending is when one person lends another person a particular cryptocurrency coin in exchange for interest payments. When there is high demand for a particular coin the interest is high and when there isn't much demand interest is low.
Lending is facilitated by an exchange that allows users to lock up their coins and then lets other users borrow those coins. Since perfectly matching the timing for when a lender and a buyer would want to interact is difficult coins are added to a pool that borrowers pull from when they're ready.
How much a pool is being used at any time is referred to as utilization. If there is high utilization interest rates will be high to incentivize more lenders to lend. If there is low utilization interest rates will be low because not many lenders are needed.
In the case of lending on Radiant the exchange used (Francium Finance) only allows borrowing to be used in yield farming. If prices fluctuate down in such a way that puts the borrowed amount at risk then the borrower's yield farming position is sold and in the uncommon case where there is much liquidation happening at once Francium has a pool of funds from from a team of liquidators as well as their own treasury to pull from.
It should be noted however that Francium Finance - like other decentralized exchanges is not insured. It has to be trusted to succeed as a business but in a catastrophic scenario it does not have a guarantee on returning funds.
People who borrow coins pay interest in order to borrow. If there is a lot of demand for the coin - if the price is going up a lot or there's a popular game that uses the coin (like Stepn for example) then interest rates are higher. People who hold their coins in the lending pool then receive payments according to that interest - the same way a bank receives interest payments for a loan you take from it.
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