Tuesday, April 23, 2024

Is Cryptocurrency Lending a Safe Way to Make Money?

Cryptocurrency loans are changing the way we think of lending. No longer does one have to worry about absurdly high-interest rates or blatantly unfair lending practices that stink of covert coercion. Now, with the power of cryptocurrency lending, you can reap the benefits of low-cost and customer-focused decentralized lending.


A Safer Way to Make Money from Cryptocurrencies

Over the years, the popularity of lending in digital currencies has grown, surpassing the expectations of both crypto-enthusiasts and crypto-newbies. During the bear market of 2018, low crypto-prices drove more innovation as hopeful startups looked for better ways to compete in floundering markets. During the period, many owners of cryptocurrencies who did not want to sell their holdings chose to lend their holdings to make money from interest.

Digital asset loans simplify the process of banking for companies and businesses. Among other things, low-interest rates, demand from traders and investors, and ease of access make cryptocurrency loans more attractive than ever.

The markets passed $4.7 billion in value as more platforms joined the scene with more customers. Customers frequent loan companies in the space, claiming a total of over 5,400 issued loans. The volume of lending in the space has surpassed $64.8 million as a result.

A popular strategy among members of the cryptocurrency community is to borrow stable coins. Cryptocurrency borrowers may use stable coins to make transactions on cryptocurrency exchanges.

Many stable coins get a bad rap for the lack of evidence to prove that they are indeed backed by assets. Project teams fail to provide sufficient legal documents to show customers that they are actually investing in a real stable coin.

Types of Cryptocurrency Lending and Providers

There are two classes that crypto lending can be divided into. The classes are depository and undetectable. Depository lending is more popular than undetectable lending.

Depository lending involves the use of a third party to secure a loan. The method gives third parties the authority to control the asset. They also set interest rates and function as a counterpart in transactions.

In contrast to the sphere of control by the third party in depository lending, undetectable lending is non-custodial in nature. It is also more decentralized in structure. The method of lending is popular among decentralized applications that operate on the Ethereum blockchain. With the help of smart contracts, such applications are able to create systems that reduce the need for users to trust centralized authorities. Smart contracts can help to increase the security and transparency of loan processes.

Comparing Cryptocurrency Lenders

BlockFi, a lending platform, was founded in 2017 and is based in New Jersey. It specializes in interest-bearing accounts that make money as well as loans in cryptocurrencies such as Bitcoin, Ethereum, and Litecoin. Loans made by block-fi have durations of 12 months. Customers make early payments at any time without having to pay penalties as one would usually have to do with a traditional financial institution.

SALT Lending was founded a year before BlockFi. Not only does the platform give users access to loans but it also gives funds directly to bank accounts. It is no wonder that the organization has been able to expand its operations to 46 states in America as well as regions in other nations. A smart contract is made for each loan and credit event with BlockFi. Firms use credit to value ratios to assess each loan. 

Nexo prides itself on allowing customers to pay interest only on the amount of funds that they borrow. This is a stark contrast to other loan platforms whose customers pay interest on their full loan.

Knowing the Law and Abiding by It

Many may believe that it can prove to be significantly beneficial to lend and receive without a legal structure in place. In a sense, decentralized infrastructure makes many legal professionals redundant. This can reduce the costs of loans significantly. However, the longer one spends without an adequate legal structure in place for their cryptocurrency activities, the more complicated things can get down the line.

Tax collectors are on their toes, chasing (hunting) down the cryptocurrency unicorns of tomorrow. Increasingly, more exchanges have had to actively participate in lobbying endeavors in order to reduce the political and legal risks associated with their business operations. New definitions of digital assets stand to threaten the boundaries of cryptocurrency business as we know it.

There has never been a better time to acquire cryptocurrency. While the 10x and moon trips of yesterday aren’t as frequent or consistent as many people would like, the fact remains that in trying to turn up the heat on crypto, corporations have opened the doors for new trends in the cryptocurrency space.

Markets don’t always produce profits. In the same vein, it is not every day that Ethereum, Bitcoin, and other top cryptocurrencies will perform as hoped. Many times, they may crush the dreams of financial freedom for people.


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