Fractional reserve lending refers to a banking practice where only a portion of deposits is held in reserve, allowing the rest to be loaned out. This concept has found its way into cryptocurrency platforms, particularly in decentralized finance (DeFi).In DeFi, users can deposit their cryptocurrencies into lending platforms. These platforms typically only keep a fraction of the deposited assets as reserves. The remaining amount can be lent to other users at interest. This system increases liquidity in the market and allows more individuals to access funds.However, this practice carries risks. If too many users try to withdraw their deposits simultaneously, the platform may face liquidity issues. Users must also trust that the platform manages the reserves responsibly and can meet withdrawal demands. Ultimately, fractional reserve lending in this space aims to enhance capital efficiency, enabling greater participation and movement of assets, though it introduces challenges related to stability and trust.