Crypto lending or Bitcoin lending is fast growing into one of the dominant trends in the world of finance and the blockchain. It is a type of Decentralized Finance wherein the investors can lend or lease their cryptos or fiat money to people who wish to borrow from them in exchange for interests. Crypto Lending is a new way to make money, similar to how we make money with crypto trading. There are different lending bots available for crypto lending, just as we utilize crypto trading bots like Bitcoin Era krypto-roboter. The fund is held by these crypto lending bots, and the process is automated.
Are crypto lending and regular lending the same?
Crypto lending and Bitcoin lending are quite similar to regular P2P lending where there are 3 parties, namely, the borrower, the lender, and the platform. However, the difference is that in crypto lending, the collateral is the cryptocurrency which the borrower must pledge as security. He has to guarantee that the loan will be paid back; else, the investor is free to sell that crypto in order to cover his losses. Moreover, crypto lending platform typically require that the borrower promises crypto assets worth 150% more than what he has borrowed.
How to invest in crypto lending:
Cryptocurrency investing can be done in a variety of ways, including crypto trading and crypto lending. Investing in cryptocurrencies such as Bitcoins is the simplest and most efficient way to make money. Traders use a variety of cryptocurrency exchanges around the world, depending on which country they are from. For example UK traders can utilize UK crypto exchange to buy, sell and trade Bitcoins online. Ways to invest in Crypto lending are stated below.
- To know this, you must first understand how crypto lending works. You will need a crypto lending platform that will work as a medium between the borrower and lender. This is the reliable intermediary which conducts the transaction. The lender/investor is someone who may have bought cryptos and waiting for prices to escalate. The borrower is looking to get funds; it could be a business or an individual who must use his fiat money or cryptos as collateral to request for the loan. When loan has been paid back, the lenders get their cryptos. The advantage is that all crypto loans are backed by either real-world assets or virtual assets.
- Crypto lending may be different in different platforms. But, as a general rule, the lender will offer his holdings at a specific rate; the borrower must decide if that rate is acceptable to him. If he is willing to conform to the loan provisions, he can offer collateral.
- You may use smart contracts where the entire process of lending or borrowing becomes trustless. Smart contracts are self-executing by nature and the terms can be accessed through a distributed blockchain network.
- In crypto lending you do not need to have a bank account, have your credit score analyzed, or your income assessed. It can be accessed by anyone and the process is very fast with loans getting approved within 24 hours. Borrowers simply have to prove ID documents. Both the lender and borrower can customize loan terms depending on their needs.
- To invest in Bitcoin lending and crypto lending, you must have funds and a platform for carrying out the process. Crypto lending platforms can be centralized or decentralized. The former allow borrowers and lenders to decide on the terms of the loan but its transfer and management are handled by the platform. Interest rates will range between 2% and 8%. The latter, on the other hand, will not use any third party for loan handling.
- As an investor, you must first look for collaterals to be offered against this loan; its value should be more than the loan’s value. Most platforms enforce a loan-to-value ratio of almost 60%. This means that a borrower will get a loan lower than 60% of the collateral which he has offered. For example, YouHodler is one such platform in Cyprus that offers 4.8% on Bitcoins and up to 12.7% on stable coins. Celsius Network is one of the leading crypto lending apps allowing to lease cryptos and earn interests between 5%-21% APY.