How are cryptocurrency and decentralized finance changing the world of lending?
New types of blockchain finance are revolutionizing the ways that people borrow, and the systems by which lenders earn interest on their capital. The movement of money around the world is becoming more sophisticated at a rapid pace. All of that opens doors for small investors, companies, and whales alike, along with the unbanked populations of the globe. This is true in lending as well, where new tools and new options deliver different alternatives than what we could expect in the past.
From The Lender’s And Borrower’s Perspective
Let’s start with the perspective of someone who is trying to make their capital work for them.
In the United States, for example, historically low interest rates mean that even something like 5% annually is difficult to attain without quite a bit of risk. Savings accounts and money market accounts don’t fit the bill – even many kinds of traditional funds don’t provide these kinds of returns consistently.
From the lender’s point of view, there is also quite a bit of red tape, and barriers to effective lending. Because of the ways that traditional fiat currency are handled, administrative costs abound. That makes today’s lending world ripe for the promise of crypto-based innovation.
New Cryptocurrency Lending Models
With the promise of consensus-based assets and decentralized finance resources, lending can break out of the mold that has supported these sustained drawbacks for lenders and borrowers alike.
Cryptocurrency is uniquely portable and transparent. With that in mind, companies are building better sandbox models for cryptocurrency lending that net lenders more interest on their assets. Some of these involve staking plans, and others are based on different frictionless transaction models.
Nexo
With this lending solution, capital holders can get up to 12% on their money, and provide loans that are secured against cryptocurrency collateral in order to bypass complicated verification processes.
Nexo prides itself on stringent KYC standards and requires more collateral than many of its competitors to minimize risk for lenders. Nexo also has a competitive loyalty program for holders of the NEXO token which currently sits at #58 on Coinmarketcap. Benefits include the ability to earn great returns on stablecoins.
Pokket
Pokket users can choose from one of 18 cryptocurrencies and get an estimated 5.5% to 15% interest. There’s no staking required, and there’s quite a bit of freedom and versatility in this crypto lending model. Earn interest on Bitcoin, Ethereum or a stablecoin such as Tether (USDT) in an accessible environment.
This platform was built by finance professionals – and it shows. Structured saving plans are broken down by APY, weekly interest, and available token quota. Then there’s also Simple Saving for BTC, ETH, USDT, LINK, UOP and others. The platform’s assertion that traders won’t have to “worry about market conditions” is salient as so many investors get nervous about what equities will do in the short term, let alone the long term. Pokket is a great off-ramp from business as usual, and an on-ramp to crypto lending gambits.
Crypto.com
What about borrowing against your crypto?
Those who want to unlock their money’s potential on the borrowing side need look no further than Crypto.com, where borrowers can secure a full 50% of the value of their cryptocurrency assets through easily collateralized lending choices.
Those type of secured lending is truly a no-hassle way to free up capital based on credit. Traditional bank verifications and other red tape are handily done away with. Just compare the process for Crypto.com’s defi lending to, say, an auto title loan or even a HELOC, and you’ll see the value of new collateral opportunities with a digital crypto asset.
This new world of exciting lending agreements is brought to us by the power of consensus-based, decentralized finance and digital interoperability. Soon, we’ll look back on traditional lending as a tedious, archaic process. Get started early with defi protocols that make the old ways of doing business look profoundly obsolete.
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