Blog Crypto How to lend your crypto and earn interest online today

How to lend your crypto and earn interest online today

date September 9, 2020 time 4 min read 639 views

If you’re reading this, you are probably aware that you can lend crypto for interest. But you may be unsure exactly how to begin lending cryptocurrency. We’re going to discuss the basics of how to lend crypto for interest using the most credible lending platforms.

Is your crypto sitting idle in your wallet?

While the crypto market has treated investors reasonably well over the past few years, you could be earning much more. A new era of crypto-lending apps is paving the way for safe and steady earning.

If you want to lend crypto for interest this is what you need to know today.

How to lend your cryptocurrency
How to lend your cryptocurrency (source: flickr.com)

How does crypto lending work? 

There are a couple of different ways you can earn interest through crypto lending. 

Crypto-backed loans are a peer-to-peer (P2P) service letting you loan assets to borrowers who use their crypto assets as collateral. Generally, these crypto-backed loans require you, the investor, to loan stablecoins to individuals who will pay you back with interest.

How does crypto lending work
How does crypto lending work (source: flickr.com)

Is crypto lending different than traditional P2P lending?

P2P lending is a system where investors like yourself are matched with borrowers through a P2P lending platform. They’re an attractive alternative to banks as interest rates tend to be more reasonable and end up in your pocket rather than in someone’s yearly bonus.

In crypto-backed P2P lending, all loans are collateralized by cryptocurrency.  This lets borrowers take out a fair-interest loan without any kind of credit check or personal scrutiny.

The loan is already backed up often more than 150% of its value in crypto.  The risk is minimized for you too because in the case of default it is much easier for the platform to recover your principal.

How to choose the best crypto lending platform

When choosing which lending platform to use, there are several factors to consider.

  • Are the interest rates competitive enough for you?
  • Is the platform easy to navigate and access?
  • Is the platform credible? 
  • Can you be sure your crypto is secure?
  • Are there reasonable fees and rates for withdrawing funds?
  • Can you retrieve your funds in a timely manner?

Major types of crypto lending platform

There are currently many crypto lending platforms available for investors and borrowers. These platforms can generally be divided into two categories:

  • Centralized lending platforms
  • Decentralized lending platforms

Both offer different benefits and limitations.

Centralized lending platforms

Centralized lending platforms act more like traditional P2P companies (like Constant or BlockFi) using cryptocurrency as collateral.

In a centralized platform, funds are stored and routed through a third-party platform. They usually get a profit from small cuts of your interest and some added fees. However, to compete with banks and other platforms, they generally make sure to provide consistent interest rates for lenders.

Because they aren’t stuck on one blockchain they can often accept many types of crypto as collateral and principal. 

Centralized platforms are a strong choice for you if you want:

  • Competitive rates.
  • More options for earning.
  • Integration with fiat systems like traditional banks.
  • Active customer service.

Before you attempt to lend via a centralized lending platform, you should research the platform to make sure it is credible. Check customer testimonials and find out what steps the platform is taking to safeguard your assets.

Decentralized lending platforms

Decentralized platforms set interest rates purely based on supply and demand for an asset on the platform. The amount of influence the platform creators have on the platform is often minimal and so is their cut of profits.

Lending pools

On one of the leading decentralized lending platforms, Compound Finance,  you can deposit any accepted stablecoin into a lending pool. Borrowers then can access loans of stablecoins from the pools in exchange for ETH or one of their accepted ERC20 tokens as collateral.

If borrowers want their crypto back, they have to repay with interest which is distributed among lenders. All rates are determined by supply and demand for each stablecoin and cryptocurrency on the platform.

Liquidity providers

Another common method for decentralized lending is providing liquidity to decentralized crypto exchanges (DEXs). On a DEX, people freely exchange cryptos for other cryptos automatically based on their current market price. However, because a third-party isn’t actively profiting they need someone to make sure there are enough cryptos held on the platform for people to exchange.

You can provide in-demand cryptos for a platform’s liquidity pool in exchange for a portion of transaction fees. While this isn’t collateralized like the lending pool model, it lets you earn interest directly on your non-stablecoin cryptos.

Decentralized platforms are a good choice for you if:

  • You hate risk and you’ll accept lower rates for it.
  • You want to keep your transactions completely on the blockchain.
  • You only hold major cryptocurrencies.

Earn decentralized and centralized interest on your crypto at rates up to 9% APY on Constant

Earn interest on crypto
Earn interest on crypto (source: flickr.com)

At Constant, you can earn interest by investing in centralized crypto-backed loans or our decentralized crypto lend.

When you invest in crypto-lend, you lend your crypto like ETH, BNB, and BTC to a DEX’s liquidity pool in exchange for a cut of the transaction fees. Right now that’s up to 9% APY.

And when you invest in our core crypto-backed loans, you can lend your stablecoins or USD to fund fully-collateralized loans with up to 7% APR in returns.

We want to help you learn how to lend cryptocurrency if you’re new to the game. We pride ourselves on ease-of-use and we have a customer service team available 24/7 to answer any questions you might have.

Don’t keep your investments idle. Invest with Constant and start earning interest on your crypto today.

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George Schooling

George Schooling

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