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Decentralized finance: The Top crypto lending platforms of 2019

Decentralzied Finance

Ever since its inception in 2009, the Blockchain and Crypto space has been rooted in bringing technological innovation to the Financial ecosystem. Bitcoin, the first cryptocurrency, was invented after the 2008 financial crisis which brought the world economy down to its knees. 

A decade later, Blockchain and Crypto are still bringing innovation into the financial ecosystem, with the introduction of decentralized finance that create credit markets. Now, long term users can lend out their crypto assets to others who have an immediate greater need for them. Users are compensated for lending out their assets with a time value interest rate. In simple words, the longer an asset is lent out, the more interest it rakes in.

In this article, we’ll explore the sprawling new business of decentralized coin lending and why it’s one of the hottest use cases for Crypto right now. 

Crypto loan startups have raised $200 million to date according to our Market Intelligence Platform. These are the top platforms by Funds raised. BLcokFi lending leads the charge with a whopping $78 million in funding, followed by Celcius at $50 million and Alchemy at $46 million.

Decentralzied Finance


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Types of Crypto lending

Broadly speaking, Crypto lending is done through two main avenues — Custodial and Non-Custodial. 

Custodial lending is a more centralized form as it involves securing a loan through a trusted third party, imagine an OTC desk or brokerage. Custodial lending gives more power to the third party as they virtually hold complete control over a user’s assets as well as sets the interest rates, and acting as a counterparty in every transaction.

Historically, custodial lending has mainly involved Bitcoin and mainly caters to institutional investors. For example, Genesis Capital an affiliate of genesis trading originated a whopping $1 billion in Crypto secured loans in 2018, according to their Q4 lending snapshot. But there are new platforms like Celcius Network which offers services to retail clients as well. 

The second of crypto secured lending is non-custodial type and it’s a more decentralized form that mainly caters traders and retail investors. This type of lending is mainly fueled by an evolving class of decentralized applications built on Ethereum. By leveraging smart contracts, these platforms can create a system where users don’t have to place their trust in centralized authority. As smart contracts will have custody of the collateral over the entire loan lifecycle and are automatically repaid once the loan is repaid. 

Some of the most popular non-custodial lending platforms include Dharma Lever, Compound and dy/dx. On that note, let’s look at the top platforms in further detail.

Top crypto lending platforms- 

These are top crypto lending platforms currently on the market. 

 

Celsius network (custodial)

The celsius network is a crypto lending platform that aims to provide financial services to the unbanked. It’s got an intuitive mobile app that lets you earn interest on stablecoins and a whole host of cryptocurrencies from Bitcoin to Ethereum. The Celsius network shares up to 80% of its entire income with its community members with no minimum balance, withdrawal period, and lock-up period. With as much as 10% interest on the top stablecoins.

 

Blockfi (Custodial)

Blockfi likes to describe itself as a digital wealth management platform. Blockfi enables its users to learn interest on BTC, ETH, and GUSD up to 6.2% interest, compounded on a monthly basis. The minimum amount is 0.5 BTC and 25 Ether before you start earning interest. 

Nexo (Custodial)

Nexo is purportedly instant lending platform with military-grade security (256 bit encryption). Nexo allows you to earn up to 8% interest per year with the added flexibility of withdrawing and adding funds at any time. Notably, Nexo is also secured by $100 million insurance of Bitgo custodian and Lyod. Interestingly, Nexo pays out its interest on a daily basis but currently offers only on stablecoins. 

Compound. Finance (Non custodial, decentralized money market protocol ) 

Compound is an open-source, autonomous protocol built for developers, managed by smart contracts and deployed on the Ethereum network. The interest rate that compound offers is quite high and what makes it unique is how the interest rate varies according to supply and demand. Compound interest is calculated daily on its platform.

Dharma Lever (Non-custodial, P2P lending )

Dharma lets you earn up to 9.4% on their wallet. Currently, Dharma is in the process of building its version 2.0 that will be able to interact with the Compound protocol. Interestingly, since its a P2P lending platform the way you lend is by creating a lending offer on its platform.

A quick look at the loans that originated since the beginning of 2019 reveals just how popular these crypto lending platforms have become. As much as $400 million loans have originated with as much as 80% of the loans originating on DAI stablecoin. It’s very evident that Crypto lending is gaining momentum is 2019.

 


 
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