Crypto lending and crypto-backed loans are becoming quite popular within the crypto community. Especially for the people looking for passive income sources. A fun part about crypto lending websites is that they provide services for both the lender and the borrower. Interest bearing loans are also, and have always been, steady sources of passive income.
Furthermore, these crypto lending websites could be considered as a liquidity source for one’s crypto assets. You can also consider them as a good repository during bearish or frozen markets.
Let’s look at some of the industry-leading websites and the services they offer.
BlockFi is probably the company you first saw if you’ve googled “what are crypto loans”. They are one of the giants in the industry. One interesting feature of BlockFi is that it is one of the few crypto lending companies that offer deposits in Bitcoin and Ether, but refuse stablecoins.
A crypto loan involving Bitcoin or Ether entails risk for both the lender and the borrower. One will normally benefit more than the other, depending upon the price movement of the underlying asset.
A disadvantage of the BlockFi-platform that many crypto lenders are talking about is the minimum deposit. The minimum deposit is 0.5 BTC or 25 ETH. With the current market prices, this is somewhere around $5,000. That is quite a substantial amount. But the 6% compounding level on ETH is simply too good for people to ignore.
Nexo is the polar opposite of BlockFi so to say. This crypto lending website allows you to deposit only stablecoins such as USDC, TUSD, and PAX. The advantage to this is that it’s the perfect alternative if you’re looking for not only liquidity for your crypto assets but stability as well. Stablecoins aren’t called stablecoins for nothing.
Nexo’s repository is secured by Bitgo, which is “governed” by Lloyd’s, giving Nexo even more bonus points in liquidity.
The interest rate on Nexo is pretty similar to BlockFi. It’s 6.5% on any of the stablecoins with daily compounding and interest rate payments.
Overall, it provides a bit more stability than BlockFi with its no minimum deposit and only stablecoin lending platform.
AssetStream is an example of a crypto lending company that has its own local cryptocurrency.
It is similar to Nexo as the local crypto is a stablecoin. But, AssetStream comes with a bit of a twist. The platform is Peer to Peer. This means that the platform automatically matches a lender with a borrower. If the lender then decides to accept the match, the result is the formation of a smart contract.
Then, the lender provides the requested amount in BTC/BCH or fiat currencies and is given the local AST token as collateral. The AST token is a stablecoin which can be exchanged for another ASTH coin. You can then trade these on different exchanges. To find out where you can trade the AST or ASTH, just go to Cryptowisser’s Cryptocurrency Exchange List. The rest is easy.
Many lenders view the Asset Stream process as overly complicated. However, it’s a good alternative for you if you seek extra security, given the provided collateral.
The disadvantage is that they pay interest rates on a monthly basis rather than daily.
Are there any more crypto lending options?
There will definitely be more companies in the future that will provide more and more innovation to the crypto lending space. Today, there is unfortunately only a small selection of sites.
It’s either a platform with stablecoins, altcoins or just fiat-to-crypto lending service.
In any event, it’s safe to say that lenders of every caliber could find a company to their liking should they dig deep enough in the crypto lending space.