What is Cryptocurrency Lending and What is its Advantage

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Updated on November 22, 2022 by
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Cryptocurrency Lending

Cryptocurrency in the U.S.A after its adoption has enjoyed a rise in popularity and mainstream adoption. According to research, about 17% of Americans have used cryptocurrencies, traded, and invested in them. The most commonly used cryptocurrencies in the U.S.A are said to be Bitcoin, Ethereum, Tether, Terra, etc. However, cryptocurrency lending platforms such as Coinlive gives room for investors or traders to lend out their cryptocurrencies to several borrowers.

These assets tend to get more value due to the interest payments available on borrowed cryptocurrencies. Also, the set of borrowers gets to stake their cryptocurrency as a security or loan refund guarantee. This gives room for their investors to sell off such assets in case the borrower isn't able to pay them back. Crypto lending can both be found on decentralized and centralized platforms while the principles are usually the same

Crypto lending consists of two factors: The lender deposits cryptocurrency loans and the borrower earns interest. The users deposit a particular amount of cryptocurrency and lend it out to receive crypto rewards. The interest usually depends on the platform and the type of cryptocurrency in use. Lending could serve as a means of making multiple means of interest at no stress.

How does Crypto Lending work?

There is a platform where the borrower and lender would meet like Youhodler. This platform connects both lenders and borrowers. The lenders are usually those who are holding onto cryptocurrencies for a valuable boost and want to grow the profit with their stored assets. The borrowers are either business owners who need funding or people who are looking for urgent cash. Is Youhodler insured? Yes, Youhodler is a member of the Crypto Loan Protection (CLP) program. This program is designed to protect lenders in the event that a borrower defaults on their loan. In the event of a default, the CLP will cover the outstanding loan amount up to $1 million

Step 1: The borrower visits a platform to request a loan.

Step 2: When the loan request is verified on the platform, the borrower makes the crypto collateral available.  Not till when the borrower can pay back the loan entirely, there won't be access to his stakes.

Step 3: The lenders will fund the loan on the platform for the borrowers and investors to see.

Step 4: Lenders would see the interest to be received as payments

Step 5: After the borrower pays the loan off, the crypto collateral is returned as his.

This is the standard and most available method to go through while lending cryptocurrency. However, some platforms come with some seductive terms and conditions. That is why it is important to locate a reliable platform. The type of coin at such an hour depends on the state of the market, risk tolerance, and desired returns. Just think of this as a savings account, you save your money to expect a particular interest at the due time while the money can be used to issue loans in the course of saving.

Advantages of Cryptocurrency Lending

1. Cryptocurrency Lending has lesser fees

Considering the fees to be paid, cryptocurrency lending reduces a higher rate of exchange fees. Compared to traditional banks where you need to convert your currency to whichever one that is being borrowed, which could result in a poor exchange rate and higher service fee.

Cryptocurrency lending would only require just a service fee and that's all. And it allows lending of loans to another country either with local funds or as cryptocurrency which saves the poor exchange rate. Most of the platforms tend to give different options of what currency you would like to receive. Some others are just cryptocurrencies while some make use of stablecoins and fiat currency.

2. Accessibility to quick loans

Loans are accessible to many traders. You know the stress and lengthy process which comes with lending from traditional banks. The whole process takes a couple of weeks and can as well go for months. However, with cryptocurrency lending, this issue can be sorted out within a few hours once it is approved. There is basically no need to drop proof of employment, government-issued ID, statements of account, and all sorts. This method relieves so much stress and is considered more accessible.

Also, if you need a quick loan, this is a faster problem solver. So far you have either your fiat currency or cryptocurrency as collateral loan and your government-issued ID if required by the platform, then such a person is good to go.

3. Crypto Collateral

Cryptocurrency lending is also the use of crypto, gold, and assets as means of collateral. You can make use of Ethereum, or Bitcoin to be obtained as a means of collateral, Dollars or stablecoins can be put up as collateral. If your gain is deposited in Bitcoin rather than fiat or real estate, most banks wouldn't consider it. Generally, cryptocurrencies approved by leading lending platforms are the most accepted collateral.

4. Transparency and retainment of Crypto Assets

On blockchains provided by these platforms, personal details are made private but transaction details are made public. This is to ensure the transactions that have taken place, how, when, and the interest required. At no point does this information have to be private, it is always available for inspection. Also, speaking about the retention of crypto assets, although when you trade crypto, you tend to lose crypto. However, when collateralizing a loan, you still own your crypto. You never need to lose the ownership of your crypto to apply for a loan.

Is Crypto Lending Safe?

While discussing whether crypto lending is safe or not, it is important to note that there are inherent risks that come with trading cryptocurrencies.

However, it is important not to go blindly with the process, read and ensure to know how exactly the market works. Following safe precautions and ensuring to lend with verified and trustworthy platforms, having an interest in fiat currency could help to manage risks.

Some platforms lack certainty, which eventually could result in a heavy crypto loss. Also, it could occur if such a platform goes bankrupt. Anyways, there are still good and profitable ways to make use of crypto lending.

List of Cryptocurrencies that have been adopted by the best crypto platforms for lending:

  • Bitcoin
  • CoinRabbit
  • Coinlive
  • Nebeus
  • Celsius
  • Blocking
  • Spectrocoin
  • Youhodler

You can check Coinlive for coins available. These are some lists of largely used cryptos that can be lent. Some stablecoins which can be lent are Tether and Gemini coins. However, you should check out your platform to see what they have to offer.


Crypto financing is a crucial component of the thriving financial sector whether you are new to the world of digital currency or not and want to learn as much as you can. The goal is to understand every bit and corner of the market. Do not jump into any opportunity provided,  be sure and certain. As juicy as any deal can be on cryptocurrencies,  likewise the downfall can come along.

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