How have crypto lending platforms affected people’s attitudes towards cryptocurrency?
Cryptocurrency has gained wide acceptability all over the world. Its rising popularity is majorly due to the decentralized finance model that the currency adopts. In November 2021, cryptocurrency passed a $3 trillion market capitalization mark. This, in turn, has resulted in the diversification of the crypto market.
One of these divisions is cryptocurrency lending. The sub-division has experienced a surge so much so that there has been a rise of crypto lending platforms not only in the US but across the world.
Most popular cryptocurrencies on crypto trading platforms
Numerous platforms trade cryptocurrencies However, they all have one common factor- cryptocurrencies. There are thousands of cryptocurrencies and stablecoins on the market.
But these are the four most-traded cryptos you will find on crypto lending platforms. They are classified following their massive market capitalization:
In 2021, there were a total of 114 million Bitcoin accounts. This huge number of users allows optimal flexibility for the currency. It can not only be used as a medium of exchange, it can also be used to receive or give loans. Bitcoin is still the most valuable cryptocurrency in existence.
Ether (ETH) is used by the popular open-source blockchain, Ethereum. With a market capitalization of $368 million and over 71 million wallets, Ethereum is one of the most-transacted currencies on crypto lending platforms
To some people, this cryptocurrency is known as Realcoin. Tether was the world’s first stablecoin as it pegged its value to a stable, that is, a fiat currency. The mild volatility of this stablecoin has resulted in wide acceptance on cryptocurrency lending platforms.
Ripple, one of the biggest payment networks, adopts XRP as its cryptocurrency. The currency was designed to cut transfer fees and delays that are encountered in day-to-day financial transactions. With over 47 billion coins in circulation, XRP has gained a central place in the world of crypto lending.
How crypto lending works
Cryptocurrency loans operate in a simple format. It uses a digital currency as collateral- the same way a securities-based loan works. This system is similar to an auto loan or a mortgage. You pledge your crypto assets to take a loan and you pay it gradually over time.
This type of loan is available on crypto lending platforms which are available online. However, some crypto lending platforms restrict people in certain areas from obtaining loans, hence you have to find one that works in your district.
While you still own the crypto you have used as collateral, you would not be able to exchange or trade it in any transaction. It is also advised that you use a cryptocurrency with a high value as collateral. This is because a significant drop in the value of such cryptocurrency will make you owe far more than you have borrowed…
Cryptocurrency loans generally provide several benefits to people who take them. They are easy to assess and can still be transacted. Also, lenders who give crypto loans find it as a great channel for investing their wealth whenever they do not have any immediate use for it.
Benefits of crypto lending platforms
Unlike fiat loans, crypto loans offer unique specifications which make them the top choice among many crypto traders and enthusiasts. The benefits of crypto lending are two-way: a part for borrowers, the other for lenders.
A. Benefits of crypto lending platforms for borrowers
1. Crypto lending is more accessible
A loan application at a typical bank can take a long time, and if you’ve ever done so, you’ll know exactly what I mean. If you have a bad credit rating, getting a loan from a traditional bank can take a long time. Both of these problems are addressed by crypto-loaning institutions. You don’t require a bank account, and your credit score isn’t taken into account on the bulk of crypto lending platforms. Crypto loans can help people acquire the money they need when regular banks refuse to even consider them.
2. Flexible loan terms
The quantity and interest rate of your loan are determined by the banks that lend in fiat, and while you can shop around, there isn’t going to be much variation across banks. With cryptocurrency loans, however, the borrower has complete control over the terms of their loan, including how long it will last, the LTV, and the fiat money or stablecoin used to pay them back. If the loan is repaid in full within the specified period, certain crypto lending sites do not require monthly payments to be made at all.
3. Crypto lending platforms have lower fees
Though crypto lending platforms do not have a structured fee template, their fees are relatively better than the ones offered by traditional banks. For the most part, there is only a one-time service fee. As a bonus, if you need to be paid in a different currency for any reason, you won’t be slapped with astronomical exchange rates.
4. A safer option
The cold wallet system and many other security and firewalls operated by crypto lending platforms allow you to access your money and keep it even if the lending platform crashes.
B. Benefits of crypto lending platforms for borrowers
1. Possibility of lending cryptocurrency
Cryptocurrency loan platforms allow users to create “interest” accounts. These allow you to lend your digital assets and get a high annual percentage yield (APY) in return, often as high as 10%.
2. Fast access to a ready market:
Unlike fiat lending, crypto lending offers a market that is easy to reach and ready to borrow. This market allows the lender good leverage over their money. You can choose when to put your money in and map out the period to want to keep investing.
How have crypto lending platforms affected people’s attitudes towards cryptocurrency
Generally, people are beginning to trust crypto lending platforms more. This is because of the secure private system that the platforms offer. Also, people have begun to cherish and accept the fact that crypto loans are easier to access than Fiat loans. There are lesser restrictions, lower fees, and affordable interest. For the lenders, crypto lending platforms offer a great way to stash money away for a long time as long as it is not needed.
Crypto loans have become a huge part of the cryptocurrency industry. Therefore, many crypto lending platforms have been developed to match this rising need. These platforms offer massive benefits which have positively impacted the way people react to the topic of cryptocurrency generally.