Since its inception, the first cryptocurrency bitcoin has caused unprecedented excitement among those people looking for a way to make a lot of money in a short period. The traditional financial system, which used to seem unbreakable, was now undergoing a very serious change. Bitcoin and other cryptocurrency assets were supposed to replace cash, but another quality of bitcoin, the ability to retain value, became increasingly apparent. Blockchain technology has also evolved rapidly, providing new opportunities for cryptocurrency investors.
One of these opportunities was cryptocurrency lending. This tool provided an opportunity for capital to flow into the cryptocurrency market in volumes that previously seemed unthinkable. This was not surprising, because cryptocurrency lending benefited all parties, and those people who wanted to get a loan secured by cryptocurrency could now do so quickly and without any problems or long waits. Investors who wanted income in cryptocurrency used cryptocurrency lending for their purposes. However, the most important outcome has been the solid attraction of cryptocurrency capital to the market.
Initially, cryptocurrency lending was exclusively available in bitcoin, but as new blockchains developed, investors were able to make money from other cryptocurrencies. They were able to gain even more earning opportunities.
Thanks to the rapid rise in the value of major cryptocurrencies over the past year, even more attention have been drawn to the cryptocurrency market and the opportunities it offers. Even people who hadn’t considered investing in cryptocurrency before have now begun to do so. The traditional lending system with its kabbalah interest rates and the need for long waits for loan approvals has slowly begun to become a thing of the past.
What is cryptocurrency lending?
Cryptocurrency lending is when you lend or borrow against cryptocurrency. Unlike traditional lending, you won’t need to fill out a huge amount of documents and wait a long time for the application to be approved, here everything is done literally in a few clicks and you instantly get a loan or lend cryptocurrency, earning good interest.
This kind of lending is incredibly flexible, with the borrower knowing exactly when they need to repay their loan and not being afraid of huge penalties, as is the case with banks. Traditional cryptocurrency lending platforms open accounts for all of their customers. And because all loans are backed by cryptocurrency, borrowers don’t have to wait for credit checks and evaluations or perform other unnecessary activities. They will get the money in the right amount immediately.
Decentralized and centralized lending
When a user does not want to sell their cryptocurrency but needs a certain amount of money, cryptocurrency lending can help. This type of lending does not involve checking the intended use of funds and the borrower’s credit score. There are two types of such lending and each of them has its advantages and disadvantages. We are talking about decentralized (DeFi) and centralized (CeFi) ways of lending
Decentralized lending platforms are based entirely on algorithms. The lending protocols that are used in this platform are either open source or developed by the project team. These platforms can offer you the best lending rates because they do not use human labor, which means they incur much lower costs. Unfortunately, any user error here is very costly, up to and including the complete loss of all assets. Also, with these platforms, you won’t know about the latest updates on the cryptocurrency market situations, which means that if you are careless, you can lose your money. If keeping your privacy and your time is a top priority for you, then you won’t need to register with these platforms, but you can expect to get credit.
Centralized lending platforms have features and pluses that differentiate them from decentralized lending. In this case, almost all operations are controlled by a special team, which in general is a positive point, because, in case of user error, the support service will be able to make the necessary adjustments and there will even be a chance to save funds in case of serious errors. However, there is another side of the coin, these platforms hire people, which automatically affects the terms of lending in the direction of increasing, and the operations themselves are not very cheap. That’s why decentralized lending platforms have more attractive rates for borrowers. However, if you want to keep your anonymity, then the centralized platforms will not give you this opportunity, because here the registration is mandatory, in addition, you will be required to provide an identity card, as well as some other supporting documents, such as the electricity bill or proof of address.
How cryptocurrency lending affects the industry
While until recently, financial speculation and keeping money in your wallet were the main ways to make money from cryptocurrency, now cryptocurrency lending has offered investors a new way to make good money. They have been able to earn a steady income by lending cryptocurrency, and this has started a massive influx of funds into the cryptocurrency market.
Increased asset flexibility
Every investor, without exception, wants to be flexible with their assets and choose them responsibly. Previously, there was no such opportunity, and cryptocurrencies, up to a certain point, were also affected. However, now, thanks to cryptocurrency lending, investors have an opportunity to save their cryptocurrency, which, in their opinion, will grow significantly. Moreover, he can not only keep it with him but also make a loan in it to get passive income for a long period. Another tactic can be to take out loans in cryptocurrency for further use of this digital and money in trading to make money on the difference in rates.
Today’s crypto lending platforms provide a great opportunity to not only borrow the amount you need without evaluating your creditworthiness, without providing a huge amount of paperwork and long waits at favorable rates thanks to collateral, but also the ability to earn up to 12% APY simply by placing your funds in a pool of liquidity. This is much more profitable than putting funds in savings accounts at banks.
An Easier Entry Barrier
You’re probably well aware of how time-consuming and time-consuming it is to check credit and credit history when making a loan. The good news is that cryptocurrency P2P lending platforms relieve borrowers and lenders of these problems. They can completely do without intermediaries and their costly services by contacting each other directly. Thus, when it is necessary to get a loan quickly and easily, these platforms often become a real salvation for borrowers.
Cryptocurrency lending has provided all investors with the flexibility to manage their existing assets, while they can simply keep their cryptocurrency in their wallets and earn high APY. Such cryptocurrency lending platforms allow earning even those investors whose capital cannot be called large and all thanks to the low entry barrier. The incredible growth in the value of major cryptocurrencies has attracted even more people who want to earn in this market. If a user needs to get a loan but does not want to get involved with banks, cryptocurrency lending platforms will be a great alternative and will allow arranging a loan for any amount secured by cryptocurrency without wasting time and providing a lot of documents. Although cryptocurrency lending started with bitcoin, today’s investors have the widest possible earning power that they use every day.