Cryptocurrency lending is an opportunity to lend your funds at interest to an exchange or lending platform, which uses them at their discretion: increasing liquidity, further issuing loans, lending margin trading, etc. Today several services are providing such services, and they are in demand.
Cryptocurrencies such as Bitcoin have emerged as a peer-to-peer means of payment and have become more investment vehicles over time. The next logical step in their development is working with lending. In this article, we will consider the principle of the functioning of the landing page and the main sites where you can use this opportunity and its programs.
What is crypto lending?
Cryptocurrency lending is a lending process that involves digital money. Individuals (lenders) can give their crypto-savings to other persons (crypto-exchanges, different companies) who need them at the moment. The loan is carried out at a particular interest rate, and there is also the nature of the debt amortization (mainly depending on how long the money will be returned and how the interest payment is structured).
For the lender, this activity has only advantages – his cryptocurrency does not just lie in the wallet, but works and brings passive income.
Five main types of cryptocurrency lending are now available on the market:
Clients issue loans to an exchange or lending platform through a landing page or other investment proposals;
Margin lending on stock exchanges. The most common type. That is secured lending, in which traders borrow money on the platform from other traders in the hope that the price of the cryptocurrency will rise or fall soon. This option is not suitable for novice traders, as it also increases the level of risk. But experienced people actively use it. Cryptocurrency is usually provided as collateral; percentages and limits vary on different platforms. Margin lending is available on many major exchanges.
Secured Bitcoin loans. That is a type of lending where a person can obtain direct peer-to-peer loans in Bitcoin using other assets as collateral. This type of service differs from margin lending in detail; in particular, it has fixed interest rates. Individuals establish their own loan offers with the desired interest rates and collaterals at their discretion. Borrowers research the market, find a suitable offer, and respond to it. An example of such a service is BTCPOP, which has been operating since 2014.
Fiat and Bitcoin hybrid loans. These are loans that you borrow in fiat and return in BTC. The borrower gives, for example, US dollars, receives Bitcoins; if the price of Bitcoin rises during the lending period, then it will need to return less since the debt is calculated in fiat. This type of landing page is used to minimize risks and for those who hold crypto, but temporarily want to transfer part of it to fiat. One of the well-known platforms offering such services is Germany’s Bitbond, a regulated microfinance market operating in USD and EUR support zones. It requires a mandatory confirmation of identity.
Reputation-based cryptocurrency loans. These loans work on the principle that lenders issue loans based on the personal reputation of the borrowers. There are many ways to build a reputation – with a large amount of collateral, or with a positive repayment history. A similar method is used in the already mentioned BTCPOP.
Fiat loans with cryptocurrency as collateral. Allows individuals to give away their BTC as collateral for a fiat loan. Perhaps the most popular service of this kind is SALT. It uses its cryptocurrency, SALT tokens. They are purchased for one of five cryptocurrencies or two stablecoins, and then you can get fiat in return. Transactions are simple, and funds are withdrawn directly to your bank account.
Crypto lending platforms
Here we are going to talk about the most popular crypto lending platforms nowadays and how do they work.
Compound is the most famous decentralised landing platform created by Californian company Compound Labs inc. in September 2018. Launching as a centralised protocol compound init incentivized investors by releasing COMP governance token turning Compound into a community-driven decentralized autonomous organization (DAO).
Aave is a lending application that gives users the ability to lend and borrow a range of cryptocurrencies using both variable and stable interest rates. This Finnish word means “ghost”, which reflects their desire to create a transparent and open infrastructure for decentralized finance.
The company started in 2017 as ETHLend, which held an ICO, raising a total of $ 16 million from the sale of LEND tokens. The founding team renamed the company to Aave in 2018 but kept LEND as the name for their token.
Term loans are arguably Aave’s most famous contribution to the DeFi space to date. This feature allows users to borrow large amounts of cryptocurrency without collateral at all. As you can imagine, no collateral lending has quickly become one of the core functions Aave has to quickly attract a huge customer base. Instead of using collateral to guarantee repayment, term loans rely on the maturity of the borrower. The loan is only approved if it is fully paid out within the same Ethereum block that was issued. If the loan is not repaid on time, the entire transaction will not take place.
Nexo has been on the market for over ten years and is trusted by 250,000 users. During its existence, it has processed applications for $ 700 million. The platform works with cryptocurrency, fiat, and stablecoins.
The standard interest rate is 8% per annum. The funds are 100% secured, and the collateral is covered by custodian insurance from BitGo and Lloyd’s of London. Interest is paid daily without commissions.
Nexo is compliant with regulatory requirements, works with KYC / AML through Onfido software.
Coincheck Lending is a service for crypto lending, with the help of which a user can provide cryptocurrency for a certain period to the Coincheck platform by drawing up a loan agreement. Upon expiration or the termination of the contract, Coincheck returns the cryptocurrency with a special annual interest rate (up to 5%). In the process, you can use all cryptocurrencies available on the exchange, but only after the account has been verified.
Yobit allows you to donate free coins to your landing page. Mostly new and little-known coins are used – this is a way for developers to promote them. The method is not a hype or a pyramid. All payments come from a special fund. Sometimes in InvestBox, the status of the plan changes from active to “No Coins,” but the user can still close his investments 100% safely at any time.
According to the experience of the participants, they can earn from 0.1 to 10% per day.
Coinsbit mainly works like Yobit. It uses coins that need promotion. To invest in cryptocurrency lending programs, you need to go through KYC verification and own coins in your main account. The commission for the withdrawal of investments is 0.2%.
Binance launched a landing site as an additional service for users that has unused crypto assets available in 2019. With the help of the lending, they will be able to increase their capital, earning interest income for lending their savings for a while.
At the first stage of the lending launch, a fixed period of 14 days is set for the following loan products: BTC, ETC, XRP, BNB, ETH, USDT, ZEC, USDC, LTC, XMR, DASH, ADA. The annual interest rates for them differ – BNB 15%, USDT 10%, the rest 7%. In the future, based on the market assessment of the initial phase, the rates can be adjusted.
Livecoin pays fees for keeping certain assets in its account. To participate, the user needs to deposit in one of the coins listed below. The larger the contribution, the greater the monthly profit will be. The program also takes into account the funds pledged in open orders.
The calculation of the amount of time spent on the account during the billing period and determines the average. The reward will be received even if the funds were in the account for only one day per month. Payment is made once a month in the form of transfer to the balance.
The Salt lending platform offers interest rates from 5.95% per annum. The minimum deposit is $ 5000, and the terms can be chosen from 3 to 12 months. There are no commissions. The site is easy to use – there is a mobile application. Unfortunately, while working with her from the CIS countries is impossible.
Cryptocurrency lending is one of the best ways to get passive income nowadays. Thousands of platforms suggest their options of crypto lending, choose the one that suits you the most but make sure to double-check everything before depositing your money in any project.