Crypto Lending is a trade where you can lend out your Cryptocurrency and earn interest. The deal is facilitated by Crypto Lending Platforms that offer to lend different cryptocurrencies like Ether, Bitcoin, and Stable Coins. The same platform could also be used for borrowing or getting a loan if you have provided cryptos as collateral. The concept then is termed as Crypto-backed loans.
It’s just the two parties of a trade for one who is lending or investing it is crypto-lending and for others who are borrowing it is crypto-backed loans.
The lender can avail three different types of options to invest his funds and earn a passive income such as: investing in individual loans, investing in automated lending bots and invest/lend to firms that perform crypto lending
There are differences between those options. The details are as follow:
Lending to an individual would be similar to trade between two people in the same/different parts of the world. The lending platform would have borrowers and lenders with their requests, and matching happens.
Lending to Automated Bots is a service offered by exchanges to optimize your crypto lending in the best possible interest rates. So if you or an institution are the owners of multiple cryptos and although a simple rule is to sell an asset when it’s at a higher price and buy back when there is dip is applied, trading multiple coins could be a tough job. That’s where Automated bot or AI/ML-driven algorithm comes in the picture, that is fed with numerous parameters like history, news, market sentiments to make the best possible decision and execute it within seconds.
You can lend your multiple/single crypto to these Automated bots, and they make sure to make the best decision of providing you with a passive income
Lending to Crypto Lending Firms is one of the most widely used lending methods that involve trade between an individual/institution with a crypto lending platform. The Lending platform than does the matching and dispatch the loans. Here there are two categories one which holds the custody of the lender’s cryptos or borrowers collateral and others that offer 100% non-custodial lending offering decentralization in real sense.
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