First off, what is cryptocurrency lending, and why is her such a buzz about it. We will begin our journey at the failures of traditional finance.
Traditional finance is clogging up and running slow.
The new technology of cryptocurrency is becoming a mainstream form of payment.
After the Wallstreet versus masses brouhaha, crypto has witnessed a user surge.
Folks are now tending towards a more decentralized system of acquiring and holding monetary assets.
Like any finance industry, there will be room for lending services. When the war against crypto is over, there will be more crypto lending.
Cryptocurrency lending involves lending assets through the means of crypto exchanges or other lending ecosystems involving an interest rate.
Blockchain technology is one of the most interesting innovations globally and has great opportunities for changing products and services.
Blockchain technology powers up the cryptocurrency’s network, the digital substitutes to fiat money.
What Do Cryptocurrency Lending Services Look Like Now?
Crypto lending platforms link borrowers to lenders in their ecosystem. Lenders have access to receive cryptocurrencies lent once borrowers are available to return the loan.
Tangible assets like real estate usually back loans; however, crypto lending networks grant users the opportunity to take up loans backed by cryptocurrencies.
There are currently very many differences that pop up when in search of a crypto lending service. The catch is that there is a fundamental system that runs and will continue to run crypto lending.
I can describe crypto lending as a lender making holdings readily available to lone at a stipulated rate. It could either be on a lending platform or an exchange platform.
Normally, Lenders of crypto assets do this for two reasons; it could either be for margin lending, the lender’s fund is made available to a borrower who hopes that the coin being borrowed will face a price increase after agreeing to pay within the stipulated time of the agreement with the interest added to it.
Various platforms offer crypto lending services. Depending on the cryptocurrency lending platform, their modus operandi differs and should be considered.
Here Are A few Cryptocurrency Lending Platforms
#1 SALT Lending
This platform provides blockchain-backed loans. SALT (Secured Automated Lending Transaction) allows the use of Bitcoin, Litecoin, Ethereum, and Dogecoin cryptocurrencies as collateral which is exchanged for cash.
This network runs on Ethereum. The ETHLend network is a decentralized lending app that offers a peer to peer zero-fee lending through smart contracts that give borrowers and lenders the right to look at the essential loan details without involving a third party in the transaction process.
This Is a European Fintech company that builds a unique peer-to-peer cryptocurrency marketplace on a komodo platform. The product of Vleepo includes a Vleepo value matrix, a valuation database for examining the potential market value of any unlisted digital assets.
#4 Crypto Lend
This platform focuses primarily on margin lending. It offers help as regards margin lending at Quione, Bitfinex, Poloniex, and funding at Bitmex. It uses a lending bot; this allows lenders to make earnings on their digital assets from the interest obtained.
Credissimo scaled it. Nexo is a blockchain tech company. It allows users to make instant crypto-loan transactions, use their holdings as collateral, and make a withdrawal of cash while holding ownership of their assets.
Why Should Cryptocurrency Lending Be Considered?
There are many reasons why lending cryptocurrency should be considered, asides from the obvious reasons, which is the direction of the financial markets.
Lending will allow lenders to generate their revenue by lending cryptocurrency to other interested users, giving them their digital assets at their disposal but not currently used by them.
Here we see a unique opportunity provided. Lending becomes a lucrative opportunity for lenders because this initiated lending system can generate higher interest rates than traditional saving accounts.
Utilizing the blockchain platform allows you to issue loans at cheaper and transparent platforms because transparency is a key issue in lending.
Blockchain technology is immutable and provides a risk-free activity, free from fraudulent activities.
The lending of cryptocurrencies is faster when compared to the traditional lending system.
Physical Pros And Cons of Cryptocurrency Lending
It takes a few minutes barely to be done compared to when a lender has to walk up to the bank and request an account to be opened for that purpose.
Sometimes the queue and process can be very frustrating.
Most crypto lending platforms have tools that ensure that funds and interest rates are automatically paid to borrowers in full without the lenders have issues with the borrower.
Here are things you should watch out for when lending or borrowing crypto because no financial industry can be entirely free from unforeseen risks.
But you should know that risk associated with crypto lending is at a minimal financial level in the blockchain market.
Notwithstanding, there are things you should look out for as a borrower or lender. The cryptocurrency market is very notorious concerning the issue of inconsistency in the regulatory framework happening worldwide.
Some governments are openly banning citizens from using cryptocurrency to facilitate transactions. Despite every effort, there’s no global consensus on the crypto market level.
However, some of the lending platforms charge so much with a higher commission as interest rates which can be outrageous.
Interest rates are usually set daily instead of using the same rate to cover the full loan period. You cannot successfully guarantee your daily profit.
Also, there have been cases where exchanges have been open to hacking, so it is advised to make an extra effort when finding a platform to lend or borrow from.
In the investment business, lenders are advised never to lend more than they can afford to lose.
So What Is My Recommendation?
Lending cryptocurrencies allows you to earn passive income if you possess a digital asset and are not ready to use it for any purpose.
It has been an excellent option for those interested in trading and the crypto marketplace but doesn’t have the luxury of time to face day trading challenges.
Irrespective of the records of successes, caution has been advised. If you are not certain about the company, some networks will help you make those financial decisions.
Carry out a proper survey before you decide to either borrow or lend your crypto.
If you have been living in the cave of traditional finance, then you might need to come out and experience the benefits of lending.
Crypto lending is opening opportunities for crypto enthusiasts, both big and small.
Crypto lending has pioneered Ethereum’s decentralized finance (Defi) network to over $1billion in locked value.
Liquidation is key to the crypto lending platform and essential to efficiency in its system.
As the crypto market continues to record constant growth, lending will continue to remain important on its records of success.