Crypto lending is dead? What will replace it? How to get started with crypto lending? A recent FTX detailed the decline of crypto lending as a viable option in the wake of trust breaches. While crypto lending is still in infancy but its potential for misuse and potential conflicts of interest does not address the question why users funds kept being misused. We’ll explore why and how cryptocurrency lending has become such an toxic part of modern digital finance. We’ll also discuss some ways you can continue to use crypto and avoid crypto lending in all costs.
What is crypto lending?
Crypto Lending is a way for people to create money out of thin air! The technology is similar to borrowing money from other investors, but whoever runs a crypto lending business broke the trust and misused users’ funds to bet for high-risk venture capitals that lost all money that they can no longer pay off all funds they owed. The idea is that you, as the lender, create a “virtual” loan to someone else, usually with a small amount of collateral (fractional reserve). You then use the money to put into high risky investments from that person or pay for them with virtual dollars out of thin air. The “lender” loaned out of your money to help them potentially leverage high-risky bets and use your money to gain their profits. Lenders can even trade against your investments when you long the assets while they shorted the assets to double dip the profits.
Why does crypto lending no matter anymore?
There are no benefits to using a crypto lending option at all. Not all crypto lenders can provide transparency about their assets-backed reserves and are likely running fractional reserves with thin-air fake tokens to boost their own valuations. When they go bankrupt, their will file bankruptcy protection to protect their assets and liquidate all their crypto to defend themselves to go total losses. You are likely to receive a fraction of the money while they can preserve their assets that gained profits from your investments.
How to cryptocurrency lending is dead
This is the most common question we get: “How is crypto lending dead?” The short answer is that there are no longer viable financial solutions.