Do you know about crypto loan?

The platforms offering crypto loans and the people using them are increasing day by day! Find out everything there is to know about the cryptocurrency loan : how cryptocurrency loans work, how to take out a cryptocurrency loan, or what are the advantages and disadvantages compared to traditional bank loans.

What is crypto loan: definition

The crypto loan is a cryptocurrency-based lending system (Bitcoin, Ethereum, XRP …) and which takes place on specialized platforms. In other words, it is possible to borrow altcoins there and pay them back gradually, or deposit your cryptocurrencies there to lend them and receive interest.

This system it looks a lot like the classic loan we know in banks, using fiat currency. The only difference is that transactions involve cryptocurrencies.

What is crypto loan in DeFi for?

Crypto loan is one of the most concrete applications of DeFi (Decentralized Finance). Recall that DeFi brings together the various financial services, but carried out in a decentralized way, that is, without an intermediary to manage and authorize transactions through a blockchain.

Loans, deposits and interest rates from cryptocurrency lending are the very foundations of DeFi. Decentralized platforms act as a means of contact between lenders and borrowers and smart contracts (programs that run automatically when specific conditions are met) validate and verify transactions, making operations completely autonomous.

How Does Crypto Loan Work?

As mentioned above, the operation is quite similar to the classic loan system.

On the one hand, there are borrowers with cryptocurrencies and wishing to borrow stablecoins or fiat currency, or vice versa, having stablecoins and fiat currency and wishing to borrow cryptocurrencies. Then they go place their assets as collateral and receive the assets they wish to borrow. The amount of the collateral must be greater than that of the borrowed property.

On the other hand, there is lenders or investors who make their money, coins and tokens available to potential borrowers. Their will receive interest in exchange for this provision.

What are the cryptocurrency lending platforms?

There are many crypto lending platforms available in the market. I’m true decentralized applications (dApps) running on the blockchain. Among the most used lending platforms we find in particular:

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Note that the lending platforms are very similar to banks in terms of operation. This is also reflected in their managementas the new director of BlockFi, a specialist in traditional institutions.

We are thrilled to welcome Brian Oliver as our Institutions General Manager. With over 20 years of experience launching and scaling global financial institutions, Brian will play a vital role in our continued global growth. Read more here:

Advantages and Disadvantages of Crypto Loans

The main advantages of crypto loan

  • Of the attractive interest rates
  • Volatility protection
  • Choice of token borrow (cryptocurrencies, fiat currency, stablecoin …)
  • Fast financing solution
  • No lengthy verification procedures like in banks
  • Accessible to bank bans
  • More security

Main disadvantages of crypto loan

  • Platform insolvency risk cryptocurrency loan
  • Risk of slowdown of the network for large transactions (lack of scalability of blockchain networks)

Conclusion: crypto loan, a viable alternative to bank loans

To conclude, the world is progressively moving towards new technologies and Web 3.0. Cryptocurrency lending is a perfect illustration of switch to cryptocurrencies and blockchains. This attraction is above all linked to the ease and speed of the loan procedures. The latter are less restrictive than those of traditional banks.

The cryptocurrency loan therefore allows you to easily finance a project, but also to make the tokens sleeping on your wallet profitable thanks to the interest rates paid to lenders. To generate passive income, the loan is therefore a great alternative to cryptocurrency staking.

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