When most people think of making money with cryptocurrency, the first thing that comes to mind is holding until it goes up before they sell. That’s not the only way to earn crypto, though. This article looks at making money through the interests you can get from crypto lending, including what it is and the best crypto lending platforms.
What is Crypto lending?
Lending is simple, and you likely already know about it. It’s giving someone cash or something else to get some interest along with the original amount when it’s returned. That’s precisely how crypto lending works.
How Does Crypto Lending Work?
With crypto lending, a lender would give out their coins to a borrower to earn interest. Like taking loans, the borrower would usually deposit crypto assets as collateral to secure the lender’s crypto. That ensures that if anything goes wrong, the collateral is available to compensate the lender.
Are there risks? Yes, which is why you don’t just do crypto lending by meeting anyone on the street or online and start a peer-to-peer lending transaction. There are crypto lending platforms that make the process more seamless and safer. Plus, some of them come with additional benefits that we will look at shortly.
Why Use P2P Lending?
P2P lending protocols will replace centralized lending institutions such as banks due to efficiencies from cutting out middlemen.
Today, you can lend out your cryptocurrency on several DeFi platforms, the majority of which are over-collateralized, which means your loan is more than protected with locked up crypto collateral.
Even if you choose to keep your assets in a “stable-coin”, which is a 1:1 US dollar-pegged cryptocurrency, you can earn 5-14% interest on your dollar. This is hundreds of times more interest than you can make from keeping your money in a savings account in a bank.
Also, some P2P lending platforms offer additional “yield-farming strategies”, allowing you to earn both interest and platform tokens as a lender.
In summary, here are the reasons why you should lend your crypto to someone else:
- Attractive interest rate: I already mentioned how you could earn 5%-14% interest on your crypto
- You can avoid crypto volatility when you lend stable coins and are sure of what you get back.
How do I lend Cryptocurrency?
As I mentioned above, there are cryptocurrency P2P lending platforms. We have two categories: the decentralized and the centralized platforms.
Decentralized crypto platforms give you all control over your account, while with centralized crypto platforms, most of the control remains in the hands of the third-party that runs the platform.
When it comes to lending, decentralized platforms allow you to lend your crypto without requiring a middleman or financial regulator. Usually, a smart contract will be used to ensure that the process goes well.
With the centralized platforms, the platform acts as the lender, giving out your assets as loans that you hold on their wallet or platform.
Top Centralized Crypto P2P Lending Platforms
The top centralized crypto P2P lending platforms are:
With Celsius, holders benefit the most and not just because of the growth of the value of their coins. Celsius Network offers a lending system where you deposit your money into the platform, and they loan it out to borrowers.
Note that those borrowers use collateral to get loans. When the loan is paid back, Celsius pockets around 20% of the profit and pays out 80% to the users that held their coin, making it possible for the loan system to work.
That doesn’t mean you earn so much. In fact, in most cases, centralized platforms like this one offer less interest than decentralized platforms. The good thing about them, though, is that you don’t deal with the work.
When you’re paid the interest, it will be on what was lent out, which means if you have USDC in Celsius Network, you will get back more USDC, not another coin. That is automatically put back into your Celsius account to continue earning interest over time. You can withdraw both the interest and capital at any time.
There’s no minimum balance requirement to start earning interest on your assets.
BlockFi offers an interest account where you can lend your Bitcoin, Ether, or GUSD to earn compound interest. Much like Celsius, you don’t have to do anything much; you only need to hold or store your cryptocurrencies at BlockFi, and it will use your crypto assets to generate interest.
To get that interest, BlockFi will lend your assets to corporate and trusted borrowers that have placed collateral to back up the loan. As with every other centralized lending platform, they do not match borrowers with lenders but act as the lenders themselves, and you don’t need to bother with the specifics.
To benefit from this system, you must have a minimum of 0.5BTC or 25 ETH in your BlockFi wallet. Interests are paid out monthly.
Best Decentralized Crypto P2P Platforms To Loan Out Assets
Here are the best decentralized crypto P2P platforms:
Compound is one of the most popular platforms and allows lenders to earn COMP tokens as a bonus for providing capital to the network. This can sometimes result in interest rates above 15% when all yields are factored in.
It’s a lending and borrowing platform built on the Ethereum network that is permissionless. Compound uses smart contracts to track ownership and interests in various lending pools.
Aave, like Compound, is a market leader in DeFi loans and lending. It operates a unique service called flash loans that enable easy borrowing without collateral that are still safe.
It uses interest-earning tokens that gain interest earned in real-time directly in your wallet. Those are called Atokens, and they are minted upon deposit and burned when redeemed.
With DyDx, loans are capped at a maximum of 28 days. It offers permissionless lending and margin capability for ETH and a few other cryptocurrencies. DyDx allows users to go long or short on their crypto assets with cross-margin lending and borrowing, which means you can earn passive income while supported assets are on the exchange.
Yearn.Finance is less known than the other DeFi platforms that we have looked at but no less effective. It has two major uses: lending your digital assets and the vaults.
For the first option, you can earn maximum interest from a pool of protocols. The vaults, which is the second option, allows you to deposit a token of your choosing to vaults or yield farming strategists who use advanced strategies to maximize your returns.
mStable aims to provide an interest rate above competing DeFi yields. It doesn’t just provide a platform for lending; it uses stablecoins, lending, and swapping to help create a more secure and usable system than the sum of its parts.
All assets earn interest within its ecosystem. If you lend through the platform, you’re likely going to get higher-yielding assets because of the combination of trading fees and lending income. That is done by lending on other DeFi platforms like Compound and distributing swap fees to mASSET holders who have opted to receive interest.
Like mStable, Alpha Finance has a couple of products that aim to increase the turnover of users that lend on the platform.
One of its products, Alpha Homora, allows you to leverage yield farming pools. ETH lenders can earn high interest on ETH. Its lending interest comes from leveraged yield farmers and liquidity providers borrowing ETH to yield farm and provide liquidity, respectively.
What are the interest rates with p2p lending? Can you get rich from crypto?
Well, the get-rich question is a frequently asked one. With crypto, anything can happen. The value of coins changes fast. Nevertheless, cryptocurrency income strategies are not get-rich-quick schemes. You can earn a good income on them, though.
That said, let’s look at the first question, which is the interest rates with P2P lending.
In most cases, the interest rates are automatically adjusted on the P2P lending platform based on demand, supply, and a few other market factors.
DeFi Rate has the real-time rates for most of the DeFi platforms. For Celsius, you can earn up to 17.78% annually, depending on the cryptocurrency. With BlockFi, you can earn up to 8.6% annual percentage yield.
Final Thoughts On P2P Lending Of Crypto
That’s it for the P2P lending crypto platforms that you should consider and the details about P2P lending when it comes to cryptocurrencies. Read all of it and consider your options.
If you’re confused about any of it, you can email us through the contact page. Alternatively, you can comment below, and we’ll respond immediately or as soon as we can. If you want to give additional tips, you’re welcome to as well.