Decentralized Finance (DeFi) has become a revolutionary idea that gets rid of middlemen by using blockchain and smart contracts. This research proposes and assesses a decentralized peer-to-peer (P2P) lending platform built on the Ethereum blockchain, designed to facilitate transparent, secure, and trustless lending transactions. Five main smart contract modules make up the platform's architecture: LoanRegistry, CollateralVault, InterestManager, OracleAdapter, and Escrow Manager. Together, these modules automate the entire loan lifecycle, from creating the loan to managing collateral, accruing interest, paying it back, and liquidating it. Stress testing with historical market data showed that the collateral and liquidation mechanisms were strong. Performance benchmarks on the Sepolia and Holesky testnets showed that gas consumption was predictable and latency was acceptable. The simulation results showed that the interest accrual and liquidation thresholds were correct, which reduced the risk for lenders when prices changed. The results show that it is possible to create modular and secure Ethereum-based lending systems. Future improvements will include the ability to work with multi-chain ecosystems, the addition of privacy-preserving credit scoring, and the use of advanced risk models to make the system easier to use, more scalable, and more compliant.
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