Make Money With Crypto #2: Crypto Lending
The global crypto market is worth $1 Trillion and is predicted to hit $5 Trillion by the end of 2030. Trading crypto has become a very lucrative way for investors to make money, thanks to its flexibility. Thus causing more people to get into the crypto market.
Making money in Cryptocurrency can be a scary game, especially if you know little about how to begin.
The Crypto market is relatively new and has been in operation since 2009, thanks to the creation of Bitcoin before other cryptocurrencies followed suit.
Currently, in the Crypto market, there are various ways investors make money, and this can be through airdrops, crypto spot or futures trading, yield farming, staking, lending, saving crypto in high-interest crypto savings accounts, etc.
Among these methods, I will be focusing on crypto lending. Below I will be explaining all you need to know about lending in crypto, and how to get started today.
What do you mean by Crypto Lending?
The term “Crypto Lending” is not as complex as it seems. In fact, it’s like regular lending, only that this time it involves crypto.
Crypto lending is a peer-to-peer service offered by decentralized and centralized crypto financial services. It allows individuals to lend out their crypto to those who need it in exchange for interest rewards.
You know how people get to collect loans from the bank so that they can buy a house, start a business, or travel, but with the guarantee that they will be paid back within a specific period and with interest?
That is the same way crypto loans work, but this time, you aren’t going to a bank and doing a lot of paper. You will be going to another person just like you — all thanks to crypto lending platforms, which help to connect lenders to borrowers within seconds.
Note: There is a common misconception that crypto lending is just for Crypto whales or large centralized crypto financial institutions. This is wrong! Crypto lending is for everyone. Provided that you have an active crypto account and enough crypto to lend out.
So how does it work?
Crypto lending works in a very simple way. First off, you should know that there are three guys important in this process. They are the crypto lender (which is you or so), the crypto borrower, and the crypto lending platform.
Now, the crypto lending platform is the middleman between you, the lender, or you, the borrower.
As a lender, you can deposit your cryptocurrency with a decentralized or centralized crypto lending platform, and borrowers can instantly get crypto loans through the lending platform.
When borrowers opt-in to get a loan, the cryptocurrency that lenders like yourself have deposited within the platform will be what is available to borrow. Let’s say that lenders majorly deposited BTC, USDT, and XRP. Those will be the cryptocurrencies that will be available to borrow.
After borrowers have gotten the loan, they repay the loan with interest, and you, as a lender, can earn interest based on the amount of crypto you have deposited.
Note: You should know that almost all crypto lending platforms set the interest rates borrowers should pay and the rate lenders should receive.
This, in turn, makes earning rates vary on various crypto lending platforms.
Why do People Lend Crypto?
Lending crypto over the years has proven to have lots of benefits over the years.
The same benefits people gain when lending fiat currencies to individuals, businesses, or governmental bodies is why people lend out their crypto.
Currently, in various places worldwide, crypto is seen as a legal tender, a store of value, and an excellent unit of exchange. It’s only fitting that it enjoys the benefits of fiat currencies, too.
Here are some reasons people lend their crypto:
- It is an excellent source of passive income for crypto hodlers and investors. Instead of letting your crypto sit in your wallet, you can put up a certain portion of your holdings for lending and earn high interest (APYs) of up to 20%.
- It is way better than borrowing from or lending your money in fiat via a bank. This is because the interest rate gotten from your bank when they loan out your money is relatively small when compared to crypto interest rates.
- You can lend out any amount, making it available for any crypto hodler.
- Most Crypto lending platforms provide regular interest payments like daily, weekly, or monthly. This means that your crypto, which has been lent out, will accumulate interest consistently until it’s paid back. Sometimes, interest rates can be in the crypto lent out or the platform’s native crypto token.
- If you have a high-risk appetite, you can enjoy and profit from the price swings of the crypto market when you lend out your crypto. Price swings tend to affect your interest rates positively or negatively.
Note: Although there are very cool reasons why you should lend out your crypto, you should know that the crypto market is highly volatile, and this service comes with risks.
How to Start Lending Crypto Today!
If you have been mesmerized by the benefits of lending out your crypto and want to head straight to lend out your crypto but don’t know how to, here are some easy steps you should take to get started at crypto lending today.
- First off, you need to select a reputable crypto lending platform. Various crypto lending platforms promise you high interest rates and shallow risk, but it is very smart to research the best ones that suit your needs. (P.S. I will be covering some below).
- Once you have selected a secure crypto lending platform, you should connect your crypto wallet to the lending platform and deposit the amount of crypto you want to lend out. You can decide to lend out USDT, ETH, BTC, or whatever crypto the lending platform supports.
- Once you have put up your crypto for lending purposes, the platform will connect a borrower to your funds. Once your crypto has been lent out, relax while your crypto is fetching you more money.
Best Crypto Lending Platforms to Try out Today!
Today, we have thousands of crypto platforms in the world that offer various services, including crypto lending and borrowing. Because of the plethora of available platforms, it can be very daunting to choose the best platform for you to lend your crypto for high-interest rewards.
Before listing out the best crypto lending platforms you should check out, you should know that there are two categories of financial bodies or platforms in the crypto world. They are: Decentralized crypto platforms, aka DeFi, which offer decentralized services and are not controlled by anyone.
When people use Defi services, they use smart contracts to execute their requests.
Example: If I want to borrow crypto to purchase a car or business or whatever it is, I can put down collateral. A lender draws up a smart contract up while putting up his crypto to be lent out. If I meet the preset conditions to obtain the loan, then the smart contract will execute itself, I will have the loan, and the lender will earn interest daily or weekly on my loan.
The next is Centralized crypto platforms, aka CeFi. CeFis are crypto platforms that want to bridge regular banking with cryptocurrency. A central body controls them and it is somehow less risky than DeFi.
When you want to borrow or lend out your crypto using a centralized platform, it is almost similar to lending from your local bank. You will be required to the KYC requirement and put in some basic information about yourself, just for security purposes.
Let’s use the example I gave earlier. If I want to borrow crypto to purchase a car or business or whatever it is on a CeFi crypto platform, then I will have to meet some basic requirements, and some vetting will be carried out before I can access the borrowed crypto after putting down collateral.
So there you have it: both crypto platforms are similar but with some distinct features. Both categories of crypto platforms have rules you should follow before lending out your crypto. This is why you should DYOR (do your own research) before selecting a platform.
Here are some excellent crypto lending platforms you should check out today!
- Binance — CeFi
- BitDelta — CeFi
- Nexo — CeFi
- Aave — DeFi
- Compound — DeFi
- Crypto.com — CeFi
- Youhodler — CeFi
- Gemini — CeFi
- Balancer — DeFi
- MakerDAO — DeFi
Finally, these platforms offer excellent APYs and the opportunity to lend in various cryptocurrencies as a crypto lender.
Wrapping Up!
Making money with crypto is easy but very volatile and risky for many individuals. This is why it is very advisable not to put all your money into crypto except that which you can afford to lose.
Although lending is very lucrative, in 2022, some big giants in the crypto Cefi space, like Celsius Network and BlockFi, filed for bankruptcy because of some lending issues on its platform.
Celsius and BlockFi paused crypto withdrawals until further notice. However, this year has been much better for Crypto lending platforms as more individuals flock to DeFi Crypto platforms to lend out their crypto for high interests.
Whether you decide to use a CeFi platform like BitDelta or Binance or a DeFi platform like Aave, you should do your research to avoid unwanted risks.
