İstanbul escort bayan sivas escort samsun escort bayan sakarya escort Muğla escort Mersin escort Escort malatya Escort konya Kocaeli Escort Kayseri Escort izmir escort bayan hatay bayan escort antep Escort bayan eskişehir escort bayan erzurum escort bayan elazığ escort diyarbakır escort escort bayan Çanakkale Bursa Escort bayan Balıkesir escort aydın Escort Antalya Escort ankara bayan escort Adana Escort bayan

26 C
New York

Crypto Lending: Famous Cryptocurrency Lending Platforms

Published:

Crypto lending is a DeFi process which allows users to lend their cryptocurrency assets to borrowers. The investors that lent out their crypto assets in exchange will get interest payments regularly.

The crypto interest you get, is not so different from the interest payment from your normal savings account.

In this process, crypto investors can lend out their digital assets like physical currency lent out by traditional banks for an interest.

How Cryptocurrency Lending Works

Generally, crypto lending requires 3 parties namely; the borrower, the lender, and the Decentralized Finance platform. Cryptocurrency has to pass through 3 stages to connect the borrowers and the lenders.

The 1st party to the transaction is the lender who may be a crypto enthusiast looking for a way to make his/her crypto asset productive.

The cryptocurrency exchange or platform serves as a 2nd party that transacts the borrowing and lending.

While the 3rd party to the exchange is the borrower who acquires the fund. They can be people or business that are looking for funding.

Mostly, the borrower will need to put up a collateral before the lender can lend out the crypto.

It is the duty of the crypto platform to decide interest rate for the borrowers and lenders. Thus; it allows them to be in-charge of the net interest margins.

However, the interest rates differ from crypto to crypto and from platform to platform. Some platforms may also attach charges for services rendered. They may also give higher rates to lenders who wants to lock their cryptocurrency for a fixed period.

In terms of Centralized cryptocurrency lending, both parties to the transaction have to put their trust in the entity or company. The company will then assist and overseer the borrowing and lending transaction.

Both the borrowers and the lenders will have to register an account with the company. Then, the borrowers can now send in their application for loans.

The borrower and lender can link up their cryptocurrency wallet a decentralized cryptocurrency lending platform. This will enable the platform to immediately assist the process of borrowing and lending through smart contracts.

The payments received by the investors are referred to as “crypto dividends”. You should know that even though Decentralized Finance follows the conventional financial system, it doesn’t demand rigid regulations like them.

Generally, cryptocurrency lending platforms are either decentralized or centralized. As a results, the lenders can get exceptional high-interest rates.

Thus; their APYs (annual percentage yields) may reach up to 15% and above. However, the rate depends a lot on the platform as well as certain factors.

Furthermore, the borrowers can make use of their crypto assets as collateral to get cash loans from crypto lending platforms.

Famous Cryptocurrency Lending Platforms

Cryptocurrency lending is a very good chance for borrowers as well as lenders. But then, recent turbulence within crypto lending platform highlights the high risks related to the industry.

Here are some crypto lending platforms to consider:

  • US

Binance.US provides a large combination of useful charts as well as an intuitive user interface. The best part is that, Binance.US charges the least fees for their spot trading and extremely sought after “instant buy”.

  • Gemini

This lending platform is the best crypto exchange for beginners. It is well-known for being secure and never suffers from hackers. Moreover, it is among the top exchanges in the United States.

  • Coinbase

Coinbase is among the largest cryptocurrency exchanges worldwide. It provides remedies to institutional traders, beginners, and advanced traders alike. It is the best place to go for individuals who wants to trade in crypto and more.

  • BlockFi

The coins from this exchange are always enough for most startups and intermediates. BlockFi products like loans are quite attractive to users and its wallet allows you to transfer coins easily in and out of their platform.

Other famous decentralized cryptocurrency lending protocols include; Balancer, dYdX, Compound, and Aave.

All of them makes use of smart contracts to systematize loan payouts as well as yields. Moreover, users are allowed to pledge their collateral to get loans. That is; if they are able to automatically meet the right requirements.

Benefits and Downsides of Cryptocurrency Lending

Crypto lending has many benefits compared to the customary bank loans.

Benefits

  • The borrower can get the loan without the need for a credit check. Even though you are not legible for bank loans, you can still secure crypto loans.
  • You can access the capital easily as long as you can meet the appropriate requirements. That is; if you can offer collateral or use a flash loan to return the funds.
  • The loans are managed by smart contracts. As a result, the borrowing and lending process becomes scalable and efficient.
  • With a little effort, you can earn passive income. Crypto holders can just place their funds in the vault and commence earning annual percentage rates (APY). They don’t need to personally take care of the loans.
  • A borrower can most times get a crypto-based loan at a very low interest rate.
  • Crypto lending is a flexible substitute for crypto staking

Downsides

  • The risk of liquidation is high according to your collateral. The prices can fall suddenly and result in liquidation.
  • The use of the smart contracts is quite risky since they are vulnerable to attacks.
  • The process of lending and borrowing can increase the vulnerability of your portfolio.

Conclusion

Cryptocurrency lending is a good alternative for crypto holders. Especially, compared to holding on to their digital assets for dear life while the assets dig a hole inside their wallets.

However, if you are ready to become involved in crypto lending either as a borrower or an investor, it is crucial to undergo a thorough research.

If you carry out the crypto lending with a trusted platform, the process can be quite beneficial to both borrowers and lenders.

Crypto lending is very popular these days. There is no doubt that both existing and upcoming platforms will keep on looking for the best ways for crypto aficionados to borrow loans, expand their cryptocurrency portfolios, and earn dividends.

Related articles

Recent articles

spot_img