Crypto Lending / Staking Crypto on Exchanges to earn

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Have you ever wondered if money can be lended on crypto the same way Financial institutions lend money via banks and other forms? The answer is yes no doubt and this has been a financial service in the ecosystem which offers investors and traders with lots of opportunities to grow their portfolio.

Loans given out by the ecosystem are classified as crypto loans and this is done through the lending process. Crypto lending is a process whereby individuals are allowed to lend their cryptocurrency holdings in exchange for payments that are of high interest or they rather keep it as a collateral to get the loan.

This financial service operates on the decentralized finance system which uses Blockchain technology and smart contracts in the lending process.

It also provides an opportunity whereby one can benefit by just staking his or her crypto holdings and then get interests on a daily basis from the holdings. Unlike lending that's done traditionally by some financial institutions, crypto lending is done through platforms that are decentralized.

This crypto lending actually has an old history from the earliest 2013 after cryptocurrency started trading in the open market. The factors that contributed massively to the growth and adoption of this crypto lending system are the;

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• High return on investments. In crypto, lending of funds requires higher interest rates compared to the normal form of lending which attracts yield seeking investors into the space and the loans are very accessible to anyone with a data connection and also convenient. You don't need that stress of processing loans physically.

• The use of smart contracts in this form of lending automates the process which reduces the costs for doing so and increases the transaction speed, making it efficient. Users or traders can be versatile I'm whatever lending terms they want to choose and there are a variety.

Users can earn money by lending their assets without actually selling their holdings and about a billion dollars worth of assets are locked in most lending platforms as traders get these loans to grow their portfolio. That's some of the benefits that comes with this.

Before going into details of how this crypto lending works, let's talk about the platforms that does this lending as not all platforms do. We have the centralized and decentralized platforms.

The centralized platform that are governed by a Central user include the Nexo and the BlockFi including Celsius. These are a few of the centralized platforms that lends crypto and holds people's crypto holdings as collateral for the loan.

Aave , compound and marketDAO are some decentralized platforms that allow users lend and borrow different types crypto and also provide users with the opportunity of using their funds or crypto assets to stake and get interests on a daily basis from this.

This crypto lending as the case may be is done by offering lenders interests on the crypto they lend. These interest rates can be variable and fixed at the same time and are mostly determined by how the market is and the risk associated with the loan.

Smart contracts method are also used by enforcing the terms of the loan such as releasing the crypto holdings kept as collateral when the loan is repaid or the likes of it. The lending also operates on Defi systems which runs without central users or intermediaries as most centralized platform does.

Users can contribute their crypto assets to a pool that borrowers can draw from and they earn interest on the share of the pool. Some may wonder what borrowing and lending mean in crypto as they have confused they definition.

Lending is a process whereby users deposit their crypto assets in a platform that is lending which are made available to people who borrow from the platform. These lenders earn interest rates for their assets deposited and the risks involved may be vulnerability in smart contract or inconsistency on the platform.

Borrowing on the other hand means people provide their crypto holdings as collateral to get loan in another cryptocurrency or can be fiat. Whenever they repay their loan, they get back their locked crypto holdings.

This is helpful because they aren't losing that crypto holding. They repay with interests on the agreed period of time. If any default is made after the deadline is reached, the platform may liquidate the crypto holdings placed as collateral to cover the loan collected.

Like I stressed, one can actually stake his or her crypto assets to get bits of that particular crypto. This is done on binance where users get to stake their Ethereum assets and get bits of ethereum on a daily basis.

You're not losing or depositing your asset to get the bits of assets which is the good thing implied. Bybit platform does it too and you can deposit dollars as well.

In conclusion, there's more to the crypto space they just trading and investing. Funds can lended to help traders and investors grow their portfolio on crypto.

Disclaimer :Any financial and crypto market information provided in this post was written for informational purposes only and does not constitute 100% investment advice. It's just basic knowledge every crypto trader or investor should have