CRYPTO LENDING AND HOW IT WORKS

The Crypto Lending Space: A Beginner’s Guide

The digital lending sector is evolving at a great pace. Depending on your perspective and where your assets are now stored, crypto lending is the best thing since the creation of blockchain technology.

Cryptocurrencies are made possible by blockchain technology. Through the usage of Decentralized Finance (DeFi), a wave of  bank transfer transformations is currently ongoing and constantly evolving.

What Is Crypto Lending?

It is the act of lending cryptocurrencies or fiat money to borrowers in exchange for interest payments via crypto exchanges or other lending platforms, as the name suggests. As part of the rising trend in finance and blockchain, interest will be charged at a set rate for lending to take place.

Crypto lending is suitable for investors who have crypto assets but are unlikely to use them any soon. It enables investors to earn additional cryptos simply by lending them out, agreeing to the smart contract, and earning a rate of interest for a set length of time.

How Crypto Lending Works

Although crypto lending differs slightly from platform to platform, the core concept remains the same regardless of whatever platform you choose. An investor uses a lending platform to make his or her crypto assets accessible for loan at a fixed rate.

By submitting collateral that will be insured on the lending platform, a borrower will request to borrow or lend some of the lender’s assets from the exchange.

The entire process of cryptocurrency lending and borrowing is secure since smart contracts are used in crypto lending, and the contracts carry out the terms.

The following three agents are required for crypto lending to take place:

A Crypto Lending Platform

Lending and borrowing transactions are handled through this platform. There are platforms that are both decentralized and centralized.

  • The Borrower

This might be individuals asking for money, and they’re usually utilizing crypto assets or fiat currency as collateral to get money for whatever reason.

  • The Lender

This is an individual investor who lends or offers to lend his or her assets, such as a crypto asset owner hoping for a price or value increase. Some of the popular lending platforms include; Nexo,Vleppo & BockFi

Conclusion

Lending cryptocurrencies can be a simple way to earn passive income; however, the technology underlying crypto lending is still in its infancy and developing rapidly. Crypto financing will mature as more platforms contribute to the ecosystem.

References

[1] What is crypto lending (https://crowdfunding-platforms.com/crypto-lending)

[2] How crypto lending works (https://www.experian.com/blogs/ask-experian/what-is-crypto-lending/)

[3] Akash Takyar (https://www.leewayhertz.com/how-defi-lending-works/)

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