Everyone remembers the November-December 2017 Bitcoin boom when enthusiasts found themselves in the middle of a crypto hype. For crypto adopters, this was a straight forward opportunity to multiply one’s capital fast. Come January-February 2018, and the hype ended, leaving the peak-hour investors facing inevitable consequences. Many sold their crypto assets as the price was going down. However, some never gave up and continued to HOLD.
This introduced a new challenge: a group of investors who needed cash while still holding onto their cryptocurrency. This new demand for instant cash created a new financial service – Crypto Lending. Crypto lending platforms allow users to borrow fiat cash at a ratio while using their crypto assets as collateral. Whether you’re looking for money and don’t want to cash out your Bitcoin or you’re interested in creating an extra income stream with attractive interest rates, crypto lending is the way to go.
Like all other investments, putting your money into crypto investments comes with its share of risks – don’t take it lightly. The crypto market can be compared to the Wild West, meaning it can play either way. You can multiply your investment in a few months or get trapped in losses for years on end. Since time is a crucial factor as far as crypto lending is involved, this article will review the world’s top five cryptocurrency lending platforms. You’ll learn the best way to earn interest in your crypto safely
Understanding Cryptocurrency Lending
lending or crypto loaning is the process of lending or loaning cash or a stable digital currency for a certain amount of time at an interest rate. There are two or three parties involved in the process, namely the lender, the borrower, and the crypto lending platform. However, some platforms also do the lending. Any potential investor is welcome to approach the lending platforms to borrow cash using your crypto assets as collateral. In most cases, the lender will set the conditions for borrowing. These include but are not limited to the interest rate, the duration of the loan as well as the minimum amount you can borrow.
The Mechanics of Crypto Lending
While crypto lending may differ somewhat depending on the particular platform you choose, the general idea is almost always the same. The lender avails his or her holdings to loan at a given rate to a lending platform or cryptocurrency exchange. People lend their crypto assets for either personal use or margin lending. In margin lending, a borrower who believes a particular coin is likely to experience a price increase borrows the lender’s funds from an exchange. They pay back the acquired crypto assets a couple of days later at the agreed interest rate.
How it Works
The process of obtaining a crypto loan almost always involves the following five steps:
• Register on the platform indicating the sum you need.
• The crypto lending platform calculates the amount of crypto you need as collateral.
• Deposit the collateral on the platform.
• Apply for the loan and await approval.
• Once approved, the platform deposits the funds into your account.
The Top 5 Crypto Lending Platforms
We’ve already earned that instead of burning the midnight oil trading, the more natural way is learning to make interest on your cryptocurrency through passive income. The ability to earn passive income eliminates stress and anxiety from your life enabling you to spend quality time with your family and friends. This translates to greater freedom to enjoy your interest and hobbies. Let’s now dive in and interrogate the list of the leading crypto lending platforms.
BlockFi is a wealth management company focusing on cryptocurrencies. Currently, they deal cryptocurrencies like Bitcoin, Litecoin, Ethereum, and USD-based Stablecoins like GUSD, USDC, and PAX. The platform doesn’t have a native token, and it offers its products with simple terms. Initially founded in 2017, BlockFi ran a Beta version of the platform in 2018 until its official launch in 2019.
The US-based company is led by a team that’s experienced and has an excellent track record in the lending industry. The firm is backed by big names and is transparent and robust customer-friendly support, and very competitive rates.
BlockFi doesn’t store the assets you deposit with them directly. Gemini, the most-regulated US-based crypto company, is their custody provider. This means your assets are safe as the industry leader insures them. The company recommends multi-factor authentication and whitelisting wallets for added security.
While they don’t have a number you can call or real-time chat, the company runs an extremely responsive support system. You can reach them via email for any queries you may have. Perhaps this is an area they may want to improve on since people are dealing with their hard-earned cash.
Ease of Use
Overall, the system is easy to use and comes across as a professional platform. The biggest challenge is the fact that they don’t display the amount of bitcoin you are holding since it only shows the value of your bitcoin in USD. The platform doesn’t cater to international clients dealing with other currencies. BlockFi runs iOS and Android apps that are simple to use and intuitive. You can use them to view balances, transactions, depositing, withdrawing, and applying for loans.
How it Works
You need collateral in the form of BTC, ETH, or LTC to get a loan with BlockFi. This should be at least 50%, which is considered enough to de-risk your borrowing. If, for instance, you want to borrow two bitcoin, you offer four bitcoin as collateral. Once you raise collateral, you must pay interest on the loan for a minimum period of 12 months.
The Loan Process
1. Login to the BlockFi website then click on ‘Loan.’
2. Click on “Apply” and enter your detail
3. The decision will be made in less than 24 hours
4. Analyze your loan offer then sign the loan agreement
5. Transfer the collateral to BlockFi’s secure vault
6. Your loan is wired on the same day in USD to your bank account or Stablecoin to your cryptocurrency wallet address of choice.
7. Make your only payments monthly through USD, BTC, ETH or LTC
8. Repay the principal in one installment at the end of the term
While taking a loan with BlockFi is far less demanding than your average bank, there’s still some information you need to provide such as:
1. At least $15,000 or more in cryptocurrencies
2. No history of bankruptcies
3. You’re aged eighteen
4. You don’t reside in a US sanctioned country or watch list
5. You don’t live in the EU, New York, and Washington
•Wallet insured by AON and secured by Gemini
•A reputable team of respected investors
•Competitive but flexible and transparent interest rates
•No using native currencies to get higher interest rates
•Interest compounded monthly instead of weekly
•Single free monthly withdrawal and after that 0.0025 BTC fee
The Celsius network is entirely based on its native CEL token for sending money and taking loans on interest. CEL is a somewhat new token and is more volatile than the established cryptocurrencies. The firm sends advertised rates to members who own and store the CEL tokens. The system has a four-tiered policy, including bronze, silver, gold, and platinum. How much you stake determines the tier you belong to.
The Celsius Network Loyalty System
The firm’s advertised rates are only given to members who have a stake. The four-tiered system is called a loyalty system: this determines what interest and benefits you receive.
1. Bronze: This applies when you have less than 5% on your portfolio in CEL tokens in their network. Members at this level receive no bonus interest or loan interest discount.
2. Silver: Once your portfolio has 5-10% in CEL tokens, you can receive up to 10% bonus interest and 10% loan interest discount.
3. Gold: When you have between 10-15% in CEL tokens in your portfolio, you become eligible for a 20% bonus interest and a 10% loan interest discount.
4. Platinum: This is the highest level and requires that you have 15% CEL tokens in your portfolio. This level entitles you to 35% bonus interest and 30% loan discount interest.
How it Works
The system works like a regular savings account, but stores cryptocurrency in CEL and earns you a weekly interest. The process is as simple as:
• Deposit your crypto into the platform’s App
• The firm loans the funds to individual and institutional borrowers
• You receive a payment from your holdings every Monday from the loans and activities.
On the other hand, you can borrow through Celsius. You only need to put in cryptocurrency as collateral, and you can borrow cash or Stablecoins on different terms. Unlike your traditional loan, the firm doesn’t perform any credit check, and you can expect approval in a matter of minutes.
Is Celsius Network Safe?
The Celsius Network is safe to use and has a user base of over 101,000 users with over $730 M in assets. The platform has so far facilitated over $5.5 billion in loans and made over $12 million in interest payments. However, take note that the firm is a custodial wallet platform, meaning they have control of the keys of users’ cryptocurrency wallets.
The Celsius platform pays interest for a wide array of crypto assets that include the following:
Celsius Token (CEL)
Bitcoin Cash (BCH)
EOS (EOS) plus a variety of Stablecoins
Cryptocurrencies like BTC, ETH, XRP, BCH, LTC, and XLM directly in the App.
Unlike other platforms, Celsius network doesn’t charge withdrawal, termination of default fees. It’s unheard of, but they say they don’t charge any fees whatsoever. The chances are that they earn their income through pumping the price of CEL tokens on their system. This means, therefore, you pay your fees indirectly.
Celsius Network’s website has a functional Help Center that has answers to any questions. This includes answers for all FAQs about deposits, withdrawals, and security, to name a few. When the answers you’re seeking aren’t available, users can submit help requests that are answered by a Celsius representative via email.
•Terms are flexible
•No fees charged
•Competitive interest rates on Stablecoins
•CEL Pay option enables transferring coins to fellow Celsius users without additional fees
•Interest paid weekly
•Supports many cryptocurrencies
• Doesn’t have a web App
•You must pay in native currency to earn higher interest
•Confusing loyalty system
•Rates not advertised
•Dubious marketing communication
•Poor rates when not using the native CEL token
Crypto.com is a hot domain name in the crypto lending industry with products and services to back up its reputation. The platform was launched in 2017 following an Initial Coin Offering (ICO) with their original idea being producing a crypto credit card to facilitate mass crypto adoption. They later expanded to value addition that includes a cryptocurrency exchange and a mobile App that facilitates crypto lending.
The platform is a one-stop-shop enabling consumers to purchase, save, spend, and borrow the leading cryptocurrencies. The site offers several staking options that will allow users to use features like rebates, interest rewards, and cash-back. Crypto.com is geared towards individual users, offering them numerous ways to benefit from their crypto holdings. The platform owns a native CRO token that facilitates low fee transactions and also provides the potential for high interest when you store your digital assets.
Is Crypto.com safe?
The platform is safe to use as it has actively embedded a security growth system on all aspects of their business. The firm runs cold storage and a hot wallet. This means that they keep 100% of customer holdings in cold storage through a partnership with Ledger, the leading producer of crypto storage infrastructure. They use their hot wallets for day-to-day operations like customer withdrawal requests. The platform uses secured and regulated bank accounts for secure fiat transactions and storage.
The firm takes customer experiences seriously and runs a 24/7 live support system.
Ease of Use
Crypto.com’s savings account plays a mainstream role in the firm’s ecosystem. They offer a borrowing service that motivates users to store more crypto on the platform. The company pays competitive savings rates on different digital assets. Users get the best rates when they save using CRO, followed by Stablecoins. The savings are done in one-month or three-month periods.
Crypto.com’s fee structure is reasonable, competitive, and reasonably transparent. Users can choose cheaper transaction fees by doing business using their CRO native token. The highest fee is the maker/taker fee beginning at 0.2% of the trade value. Staking in CRO tokens gets you a 20% ROI on saved amounts and, of course, lower fees.
The firm’s customers can lock their crypto assets when they lend via Crypto Earn for a pre- agreed period. Crypto Earn supports CRO tokens or other digital assets, including: ETH, BTC, LTC, BNB, MKR, XRP, BAT, LINK. And Stablecoins like: DAI, USDC, USDT, PAX, TUSD.
Is Crypto.com Regulated?
The platform’s risks and compliance officers ensure all processes follow laid down policies and procedures. These officers are responsible for all internal reviews to ensure they meet all regulatory requirements. FDIC also backs Crypto.com, and US balances belonging to US residents are covered for up to $25,000.
•100% of digital customer assets are stored in cold storage
•Continuous addition of new interactive features
•Insured by FDIC
•Regular discounts offering up to 50% off coins
•Excellent user-friendly interface
•Relatively new in the market
•Lacks a proven track record
•High staking rewards make users nervous
Nexo is owned Credissimo, a Malta-based Fintech company founded in 2007 with the sole intention of disrupting the digital lending industry. The company has a customer base of over 350,000.
What Is Nexo?
Nexo is a cryptocurrency loan platform enabling that offers users crypto-to-fiat and crypto-to-crypto loans without surrendering their crypto assets. The platform provides its services in over 200 jurisdictions and in over 45 fiat currencies. The firm has offered crypto-backed loans to over 200,000 users and is probably the only other platform that issues a cryptocurrency credit card to users.
Is Nexo Legit?
Nexo operates under strict regulations and is SEC-compliant besides working under the observation of European Banking and Financial Service Regulators. The mother company is regulated and compliant with Maltese regulations, and Deloitte audits its finances. The platform’s assets are insured by asset custodian BitGo, which is itself insured by Lloyds of London for up to $100,000,000. The company uses Two-Factor Authentication for all client log-ins. Ant type of sensitive user information is encrypted using Secure Socket Layer (SSL) technology.
Why Use Nexo?
•Global Access: The firm offers services to over 200 jurisdictions.
•Multi-Asset Support: users can borrow against Bitcoin, Ethereum, Nexo, Ripple, Binance Coin, Litecoin, among others.
•Tax Benefits: users can borrow capital against their crypto assets. This is beneficial in countries where holding crypto assets for an extended period reduces taxes owed on their appreciation in value.
•Convenience: Securing a crypto loan is almost instant.
The best thing about Nexo is that it’s open to almost all consumers. All that you need to do is open a Nexo account and deposit your collateral therein. However, you have to pass a basic and advanced verification process that involves entering your KYC/AML information before you can access a Nexo loan. Nexo also accepts fiat transfers to cater for the different jurisdictional areas.
The Nexo Loan Process
Getting a Nexo loan involves four easy and user-friendly steps. They offer an excellent alternative for a real-time bitcoin loan:
1. Open a Nexo account
2. Deposit your crypto assets into your account
3. You get access to an instant credit lien via the Nexo automated system
4. Choose between spending your cash via a Nexo debit card or withdrawing it through your regular bank account, and you can also deposit your money into you Nexo Wallet
•Funds insured for up to $100 million per wallet
•Attractive interest rates
•Better interest in Euros
•Supports business accounts
•You only need crypto to obtain a loan
•Allows over 20 different crypto assets
•Firm doesn’t charge transaction fees, origination fees or prepayment fees
•You can’t buy cryptos in the app
•App doesn’t allow exchanging cryptocurrencies
•Users can take loans against high-risk cryptos
•Native token doesn’t provide utility
CoinLoan has disrupted the foundations of financing through a combination of cryptocurrencies and crowdlending. The platform is a peer-to-peer lending platform that secures loans against cryptocurrencies. You borrower temporarily relinquish control of your predetermined amount of cryptocurrency to finance a fiat loan.
The firm ensures both borrower and investor loans as they are over-collateralized. As soon as you deposit your crypto asset onto the platform, it becomes collateral for a loan of up to 70% of its market value. If, for any reason, the value of the collateralized cryptocurrency drops during the loan’s term, the balance of 30% becomes the insurance that the firm can sell to repay the investor.
Is CoinLoan Safe?
CoinLoan guarantees the protection of customer assets through numerous lender guarantees and repayments through the crypto collateral guarantee model. The firm automatically informs borrowers when payments are due besides notifying lenders when loans have been paid off. All transactions are secured using SSL protocol plus other additional methods. CoinLoan has all the required licenses to operate within the European Union. It has sufficient infrastructure and legal capacity to secure user funds.
How Do You Get Started
It’s simple, you only need to sign up at CoinLoan, and you’re good to go. You can only make deposits after your information has been verified. You can use your debit/credit card to deposit funds or SWIFT, SEPA, Alfa-Bank, and AdvCash.
As per their website, anyone can use CoinLoan from any part of the world, as long as they are over 18 years old. The firm is required to comply with KYC/AML policies as a way of getting proof of customer identity.
CoinLoan supports at least seven cryptocurrencies as a security for loans.
Bitcoin Cash (BCH)
CoinLoan Token (CLT)
CoinLoan says they plan to add more supported cryptocurrencies in the foreseeable future. The platform has a native digital token – the CoinLoan Token (CLT).
You can also withdraw your funds using the following Stablecoins:
The Loaning/Borrowing Process
The process of borrowing or lending is a straightforward one and works as follows:
1. Open an account on the firm’s website
2. As an investor, deposit your fiat funds or Stablecoin. For borrowers, you deposit, deposit the cryptocurrency that’s going to secure the loan.
3. Use the Lending Market to select the most suitable offer to give a loan or create a custom offer
4. If you’re a borrower, commit to making timely payments, or you put your collateral at risk
5. Once you pay off your loan as a borrower, the lender receives his/her funds with interest. If you’re the borrower, you take back your cryptocurrency.
•High chances of borrowers repaying loans since digital assets secure loans
•Simple setup and verification
•70% LTV for extra borrowing and lending equity
•Unser-friendly dashboard for investors and borrowers
•Regulated under EU legislation
•You can create a custom loan
•No buyback guarantee
•Few borrowers and investors currently
Should you Venture into Crypto Lending?
There are numerous advantages associated with crypto lending. First, lenders have an opportunity to generate passive income through lending their crypto to other users by offering the idle crypto assets they are not using or planning to sell. Compared to traditional savings accounts, this type of lending generates a relatively higher interest rate. The use of blockchain technology introduces a higher level of transparency that also ensures loans become cheaper. What’s more, the technology’s immutable nature provides a reduced risk of fraud.
The process of crypto lending works faster than conventional loans. You only require a few minutes to create a lender account on a crypto lending platform or a cryptocurrency exchange. Compare this to the opening of a traditional bank account, which can take up to a few weeks in some exceptional cases. Most importantly, crypto lending platforms feature tools that ensure the lender’s funds and interest rates get repaid automatically.
A Little Word of Caution
The financial industry, which includes the cryptocurrency market, is never entirely risk-free. While the risks associated with crypto lending a relatively low, there are nonetheless essential things you want to be careful about when you choose to enter the world of crypto lending.
Firstly, the global crypto market exists in an environment with a non-existent or inconsistent regulatory framework. Some governments have banned cryptocurrencies altogether while others are approaching the subject cautiously, more or less successfully. Notwithstanding, the industry is yet to agree on a global regulatory consensus.
Consequently, legal issues could be treated differently in your country of residence and the jurisdiction where the lending platform is located. This can create some bureaucratic bottlenecks every once in a while.
Second, some crypto lending platforms will charge high commission fees from the interest rates paid by borrowers. There’s also no way you can guarantee your daily profit as interest rates are set daily, as opposed to covering the entire loan period. What’s more, cryptocurrency exchanges have been vulnerable to hacking incidents in the past, and, as such, you must carefully seek to find a trustworthy platform. The bottom line is, in the investment business, only lend as much as you’re willing to lose, whether you are using fiat or cryptocurrency.
Crypto lending offers you a quick opportunity to earn passive income for the digital assets you own and are not using at the moment or planning to sell any time soon. There is no better opportunity for cryptocurrency enthusiasts interested in trading but have little time available to deal with day trading. Even in the face of all the perks, always tread cautiously. Once again, always use your due diligence before lending your crypto or taking a cryptocurrency loan.