Cryptocurrency Lending

A How-To Guide

Disclaimer: I am not a financial adviser. This guide is for informational purposes only, and should not be considered financial advice. Decisions based on the information in this blog are the sole responsibility of the reader.

Lending cryptocurrency is an easy, automatic way to generate income on cryptocurrency that you do not plan to sell or use in the near future. You can lend manually, or via a script. If you’re reading this and you don’t know what cryptocurrency is, I recommend checking out this video.

Why Lend?

For multiple years, I tried to become a daytrader, and lost a lot of money in the process. Having a full-time job, I couldn’t give daytrading the necessary time and effort it needs to get good at it. Eventually, I decided that daytrading was not for me, and looked into other ways of making money in the cryptocurrency trading economy — that’s when I found lending. Lending lets me generate interest on my cryptocurrency at a much higher rate than holding fiat in a traditional savings account would, going as high as 5% daily interest during the Bitcoin Cash fork.

How it Works

Although the implementation differs from site to site, the basic idea is the same. You (the lender) put up your cryptocurrency available to loan for margin trading at a specific rate on an exchange. A borrower who is going long on that cryptocurrency (thinks the price is going to go up) then requests funds from the exchange, and if your loan has the lowest interest rate, borrows your cryptocurrency. At the end of the loan period (usually 2 days, but can be longer), the borrower returns your cryptocurrency to you, along with the interest.

If you are familiar with margin trading, you might be thinking, “But margin trading is risky. What if the borrower was wrong, and the value of the cryptocurrency goes down? Could I lose my lent cryptocurrency?” These are valid concerns. The answer is that the exchange has safeguards in place. The borrower must maintain a certain % of his collateral (usually 20–30%), so that if the value of the cryptocurrency goes down drastically, the borrower is margin called and all of the lent funds (plus the interest due) are returned to you. Alternatively, some exchanges offer lending directly to the exchange itself, instead of between users. I recommend reading the lending guide for whichever exchange you lend on, in order to have a complete understanding of that exchange’s specific implementation. Lending is not risk-free, but due to the safeguards in place, I would consider it to be nearly risk-free.

Where to Lend

There are multiple exchanges that support lending, each with their own advantages and disadvantages. This is not a comprehensive list, and I recommend looking around for the best exchange that fits your needs.

Poloniex (en)

Cryptocurrencies available to loan: BTC, BTS, CLAM, DOGE, DASH, LTC, MAID, STR, XMR, XRP, ETH, FCT. Tends to have higher rates on Bitcoin than other sites. Compatible with the lending bot. However, withdrawal limits are quite low, especially for new/unverified accounts.

Bitfinex (en, ru, jp, cn)

Cryptocurrencies available to loan: BTC, LTC, ETH, ETC, ZEC, XMR, DASH, XRP, MIOTA, EOS, OMG, BCH (also USD). Tends to have higher rates on altcoins than other sites. Compatible with the lending bot.

Liqui (en)

Cryptocurrencies available to loan: BTC, ETH. Offers exchange lending at a fixed rate. Will also be adding regular lending eventually.

Coincheck (jp, en, id)

Cryptocurrencies available to loan: BTC, ETH, ETC, LSK, FCT, XMR, REP, XRP, ZEC, XEM, LTC, DASH, BCH (also JPY). Offers exchange lending at fixed rates.

Quoine (jp, en)

Cryptocurrencies available to loan: BTC (also fiat currencies).

Setting up a Lending Bot

First, let me say that you do not need to use a bot for lending. All that is needed is to deposit a cryptocurrency on an exchange, select a rate, set the loan to auto-renew, and leave it. However, by using a bot, you are able to take advantage of the changing rates (and spikes in rates) in order to increase your returns.

There are a few lending bot scripts/websites available, some paid and some free. I use a free one called poloniexlendingbot, which works on both Poloniex and Bitfinex.

Step 1: Install git. I use Git for Windows, and that’s what I’ll be basing the rest of this tutorial on.

Step 2: Install python. Download an installer from here. Click next through all of the install confirms, and make sure it’s added to your PATH. You might need to restart your computer.

Step 3: Install poloniexlendingbot. Follow this guide. For git commands, right-click inside your home folder, select “Git Bash Here”, then enter the commands. For python and pip commands, hold left-shift, right-click inside your home folder, select “Open PowerShell window here”, then enter the commands.

Step 4: Set up your bot. Follow this guide, which explains the entire config file in detail. You will want to customize your bot in order to get the most gains — balancing lending rate and time spent lending. I recommend trying different rates and settings and seeing how they work for you.

Step 4.5: Although not necessary, I recommend setting up the web server in order to have a quick way to check on your bot and see how your loans are doing. In the config file, remove the hash sign (#) from the start of these lines:

startWebServer = true
customWebServerAddress = 0.0.0.0
customWebServerPort = 8000

You will also want to change the customWebServerAddress to 127.0.0.1, so that only you can see your bot’s stats. If you leave it on 0.0.0.0, anybody will be able to view your stats by going to your IP address.

Step 5: Run your bot. Either double-click lendingbot.py or run the command “python ./lendingbot.py” in the PowerShell window. That’s it!

Step 5.5: Check your stats. Open a new tab, type “127.0.0.1:8000” and hit enter. If everything was configured correctly, you should see your bot’s stats. Note that you need to leave your PowerShell window open in order to keep your bot running.

Thanks for reading! If you run into problems setting up your bot, feel free to send me a dm on twitter. Also, if you found this guide helpful, please consider donating (1Hypron8gvAqKRJnWW56EfGKw9FQ9oPJv7), or using one of the referral links on my site.

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