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In the FIAT world, currency can be lent for interest. There are various ways to do so via p2p lending or Term Deposits.
In the Crypto world, you can also use crypto lending programs. Cryptocurrencies can be lent to margin traders, SMEs and exchanges looking for liquidity.
Most of the crypto-based loans require crypto for collateral. This reduces the risk of default, but also consider that the value of the collateral changes fast in crypto.
Lenders have options when it comes to investing in crypto lending programs.
- Invest in individual loans
- Invest in automated lending bots
- Invest in companies which perform crypto lending
- Diversification strategy amongst all of the above.
There are risks when it comes lending out your hard earned crypto!
Not your keys, not your coins. Many lenders ask you to deposit your coins in a centralized wallet when you do this you do not own your coins, you own a claim on the assets of the management company. Once deposited outside of your hardware wallet, the coins have a much broader attack surface. There are many more doors leading to your coins, the risk of losing them is much, much higher.
- Not owning your coins
- Borrower Default
- Middle man failure
- Your own Greed
- API Hacks
- Social Engineered hacks
- System malfunction
- Tax tracking and Tax implications
- Lock up time / Opportunity cost
- Unclear Fee structures of automated lending
- Missed Crypto Forks
- Regulation, Interpretation and Understanding
- GDPR issues
- Compound Interest
Investing is all about risk and rewards, choose your balance safely!
Coinloan is a p2p based crypto lending platform based and licensed in Estonia, open worldwide. One important feature is that crypto can be converted to FIAT and vice versa on their platform. The smallest loan amount is $50 and there is no maximum limit.
The borrowers need to deposit crypto and then propose a loan up to 70% of the current crypto asset values. To generate passive income lenders can either take up the loans proposed by borrowers or propose loans to borrowers with different conditions. The Crypto collateral is locked up until the loans are paid, the interest is paid in USDC.
BeeLend is a p2p lending marketplace, it connects lenders and borrowers, in addition, there is a third role called the guarantor whose job is to guarantee the loans in case of failure to pay back the loans. This site does not focus on crypto-based loans but allows lenders and borrowers to settle their payments in Crypto. Site fees need to be paid in fiat.
BlockFi is the leading financial services producer in the crypto industry, offering interest-earning crypto accounts and USD loans backed by cryptocurrency. Their latest product, the BlockFi Interest Account, offers clients 6.2% APY compounding interest on BTC or ETH stored at BlockFi. Founded in 2017, they provide institutional-quality services to crypto investors worldwide, including 47 U.S. states. BlockFi is the only independent lender with investors include crypto heavyweights Galaxy Digital Ventures, Coinbase Ventures, and Consensus Ventures, as well as traditional financial institutions such as Fidelity, Akuna Capital, Susquehanna, and SoFi. See our review of BlockFI
Bloqboard provides a user-friendly UI and UX to the Dharma protocol, it was launched during an MIT Bitcoin Hackathon. Dharma is creating a protocol for trustless lending, without third-party risks except those for smart contracts. Lending assets are tokenized in Dharma debt token (ERC-721 standard) which can then be sold to others, providing liquidity to lenders.
In the case of borrower default, the Dharma protocol manages the transfer of collateral back to the lender. Bloqboard can be considered as a “Bulletin Board” which provides listings of loans and the functionality to create loan requests.
Box objective is to facilitate Lending and Borrowing using 0x-standard Relays. They have already created a mainnet Dapp https://portal.bzx.network. The platform facilitates leveraged and short and long positions. There is a 10% fee on the interest for lenders, and there is also a decentralized insurance fund.
BitBond is based in Germany and has a BaFin licence since October 2016. Bitbond is a crypto lending platform for business owners. Their focus is on online business owners whose track record can be easily verified. The lending limit is 25k.
BitBond bases their fees on the loan repayments rather than the loan sourcing, this aligns their incentives, meaning they have the interest to lend to those who will actually pay back. Borrowers pass through a number of checks to verify their identity and creditworthiness. Their USP is instant funding, available globally and 24-hour approval.
BitBond fee schedule is
- 3 months term loan 0.5% of the repayment amount
- 6 months term loan 0.7% of the repayment amount
- 12 months term loan 1.5% of the repayment amount
Investors have an AutoInvest tool which automates this passive income revenue stream.
When borrowers fail to pay, BitBond contacts the borrowers and reminds them frequently via different channels (emails, text etc). Failed loans are escalated to the debt collection agency and tend to the court system.
Learn more about BitBond:
- Bitbond good for borrowers rather than lenders
- Actual return of BitBond Loans
- BitBond stats. These offer a glimpse into the performance of BitBond, however, the number of late, defaulted and bad debt loans are not included.
BTCPOP was launched in 2014, was then acquired in 2016 by new management. It operates the world’s first Bitcoin reputation based lending. It has more than 21,000 registered users and has processed over 1 million in loans. BTCpop has a term deposit like function for Bitcoin which provides a yield. Most importantly BTCpop is one of the very few (if not the only one) that shares the staking rewards with the coins deposits. BTCPOP has three potential streams of passive income, Bitcoin term deposit accounts, staking and Crypto loans! See also our in Depth review of BTCPOP
Bitfinex is a crypto trading platform based in hong kong. Bitfinex has margin trading facilities, margin traders need to borrow tokens to execute their margin trades, this creates a lending market for a number of cryptocurrencies. The rates vary according to demand and supply. Typically when the market is swinging wildly the interest rates go up as margin traders execute their momentum trades. Bitfinex was hacked , this is a reminder that margin lending is a risky passive income stream.
Celcius was launched as an ICO which raised $50 million. The CEL token is not currently being used on the platform but in the future, it will provide discounts.
Celcius business model is to be a middle between those who have cryptos to lend and those who need crypto. Those who need crypto include those who are looking for a personal loan to exchanges seeking liquidity. Borrowers get a certain interest rate and lenders are paid passive income in a lower interest rate, Celcius pockets the difference.
The website states that Crypto Custodians (BitGo) are major exchanges are used to manage the Crypto deposited. The depositor is paid the share of this profit as interest. Celcius highlight that the coins deposited is not used as company working capital.
The system works from a mobile app, after KYC, the coins deposited can be lent out. Interest is generated and calculated on a daily basis, then it is distributed weekly and paid in the respective currency of the deposit made on the app (BTC, ETH, etc.) When the coins are borrowed the borrower needs to provide cash collateral of equivalent value. It seems the interest is not re-lent automatically. The maximum withdrawal is of 24k USD in 24 hours.
Coincheck is a Japanese crypto loan investment platform. It provides unsegregated, unregulated and uncollateralized loans which carry FX risk. Which can be withdrawn/returned as per the needs of CoinCheck. The maximum interest rate is 5%
ØCryptounion is a crypto credit union. It runs on Komodo. They have also set up a Tezo’s delegation service. Users are shareholders and earn a share of the profits. They have 2 interesting products one is a Secured Bond product, which earns 6% APS, capital can be invested in crypto but is converted into FIAT and interest is earned in FIAT. The bonds are tokenized and tradable on Ødex. Secondly, they have a staking pool, it seems that with this pool they plan to participate in diverse platforms and share the stakes.
CoinLend is an automated bot which can lend on
It is free to use, but the premium version provides more potential for passive income because of the diversified use of lending strategies. In order to use CoinLend, the investor needs accounts on the relevant exchanges.
Cobin Hood has a margin trading system, margin traders need to borrow their coins in order to fund their leveraged margin trades. It is possible to automate margin trading on Cobinhood via CoinLend.
Compound, is an Ethereum based protocol facilitating borrowing and lending of ERC20 tokens. Interest on Compound is calculated in real time, the interest is calculated per block and each lender receives the same interest. Interest is paid per block, lenders can lend for any period of time and they will earn interest accordingly. Tokens can be withdrawn instantaneously. Interest is paid in the same asset as it is being lent. Interest is paid into the supply balance, which is then re-lent automatically.
There is a 0.025% origination fee for the borrower and the lenders have to pay
10 to 15% of the passive income interest earned, back to the compound developers. ETH needs to be wrapped in order to be lent out resulting in WETH.
See Compound stats
15. Credible Friends
Credible Friends is a system to keep track of loans you make to your trusted friends. These loans are your responsibility. Crediblefriends.com does not perform any due diligence or provide any guarantees that the loans will be paid back.
Interest 25% APR of which 40% goes to crediblefriends.com/ and 60% goes to the lender. The minimum payment is 1% of the borrowed capital plus interest, if this is not met there are late payment fees.
ETHFinex is an exchange focused on ERC 20 tokens, it has margin trading options. Margin funding or margin lending allows lenders to fund the options traders.
Lenders have to pay 15% of their passive income interest as fees. ETHFinex has an Auto Review feature to lend all of their funds including any generated interest. The Auto review can be set at the flash return rate (FRR), this is the average rate of return and is calculated on each asset. The FRR
EthLend is a decentralized p2p lending platform, focused on ERC 20 tokens. The ETHLend app can be accessed through MetaMask. Loans are collateralized with over 90 different ERC 20 tokens. The collateral cryptocurrency and the interest might not necessarily be the same.
The smart contract manages the whole process including the defaults of loans, penalties and the transfer of the collateral. Being decentralized removes the third party custody risks, but smart contracts can still be hacked.
ETHLEND fees for both borrower and lender can be reduced by 50% when using the LEND token.
18. Invictus Capital
Invictus Capital operates several crypto funds. They have considerable sums in crypto assets “lying idle”. They have announced that their fund will be investing in margin lending to create passive income streams.
19. Fast Invest
Fast Invest is a p2p lending platform which will be expanding their offerings to cryptocurrency holders. They claim that lenders will be earning a passive income of up to 20% on their crypto lendings.
Lendo is a cryptocurrency lending platform due to open in q1 2019. The lending process will be seamless as there will be no credit checks since all loans will be collateralized. The platform will be open globally for borrowers. Initially, Lendo will accept only Bitcoin as collateral and the interest payments will be in FIAT. The collateral value is taken as the moving average price in the last 30 days, loans up to 60% of the collateral value will be provided.
Only FCA regulated and licensed brokers can lend on Lendo. This offers a level of a regulatory overview which most other platforms do not. It will be institutions lending to borrowers rather than other peers. However, this also cuts outs most small time lenders seeking to diversify their passive income streams.
21. Lending Block
Lending Block is an institutional oriented cryptocurrency lending exchange. It raised $10 million in April 2018. It currently supports BTC, ETH, LTC and BCH. Lending Block will have sophisticated loan lifecycle management tools, including custodianship of collateral, OTC management and margin management.
The interest rate and duration are agreed between borrower and lender, interest will be paid in LND. The minimum lending and borrowing is $50k. Collateral values will be monitored in order to have healthy LTV ratios. Both the borrowers and lenders have to pay fees to lending block.
Loan Scan is a website which monitors loans on the Ethereum blockchain. It is an excellent tool to learn more about current interest rates and new and upcoming loan platforms.
Liquid.io was founded in 2014. It has traded $50B between July ‘17 and July ‘18. It was launched via an ICO which raised more than $100M. Liquid has more than 300 employees.
The liquid platform has margin trading, lenders can offer loans to the margin traders. Margin lenders need to pay an interest payment fee of 50% on their passive income interest. The interest is paid daily. Investors have the option to check on the button “Auto Re-loan” to re-lend the funds at the same rate.
Learn more about Liquid Lending
Maker Dao is a stable coin project. There are 2 coins powering the ecosystem the DAI stable coin and the MKR governance coin. The idea is to keep the value of 1 DAI equivalent to 1 USD.
The lending system is referred to as a CDP (Collateralized Debt Position). ETH is deposited/lent to the smart contract. In return for the loan, the smart contract will provide DAI. The amount is determined by the LTV (loan to value ratio). When the borrowers pay back their loan’s interest is paid and with this interest, an amount of MKR is burned.
Passive income in the Maker DaO ecosystem is held by owning MKR rather than lending to the DAI contract.
DAI can be locked into the DSR contract for a period of time, the interest in this passive income vehicle can go both up and down depending on the peg of DAI to the USD.
25. Money Token
MoneyToken claims to have over 53,000 users. The opportunities for lenders are limited though, as investments need to be of a minimum of $100k, this might be lowered in the future. Interest will be paid daily and withdrawals are processed immediately.
For borrowers, collateral is taken at 50% of its value, i.e. borrowers can only borrow 50% of what they put up as crypto collateral.
Loan terms are anywhere between 3 months and 60 months.
Loans are done in stable coins only.
- Tether (USDT)
- Circle (USDC)
- TrueUSD (TUSD)
Money Token has its native token IMT, when lenders hold it they can earn more interest, it is also burned periodically.
Nexo provides instant loans against crypto collateral. They have an ongoing campaign “Nexo everywhere” where they are trying to have Nexo “lending buttons” in all major platforms and apps. Nexo has successfully added the “Nexo Loan Button” on Coinmarketcap coin pages.
A Nexo credit card allows users to spend their funds directly. Borrowers paying back the loan back Nexo, are entitled to discounts.
Nexo does not allow lenders to invest directly in individual loans. NEX token holders are entitled to 30% of the profit made by Nexo. There is an effort to pay token holders quarterly. To receive the dividend token holders, need to be registered on the platform, completed the KYC and deposited the tokens.
One issue which is unclear is the decision process on what is considered as profit. A company can pay its shareholders a dividend (this is not to be confused with token holders), any leftovers become part of the 30% distribution formula to the token holders. How is / will Nexo decide on the dividend payment to its shareholders? See Also our Review of Nexo
It seems that the next Nexo Wallet has the facility to lend coins
Nexo is better than any crypto wallet or bank account:
– Instant crypto-backed credit line in 40+ fiat currencies
– Earn high-yield interest on all your assets
– Spend using your Nexo Card (early access coming)
– Guaranteed by world-leading crypto custodian insurance#SneakPeek pic.twitter.com/1suJvPLpEx
— Nexo (@NexoFinance) January 28, 2019
Poloniex was the go to exchange at the start of the crypto boom, it went through a difficult phase of poor support. This has improved since it was acquired by Circle. Poloniex offers margin trading and has a market for margin lending. The cryptos that can be lent are BTC, ETH, Doge, Clam, LTC and DSH.
Loans terms can be between 2 and 90 days, and they can be auto-renewed. Borrowers can quit a loan, however, lenders cannot recall a loan. Poloniex takes a 15% fee from the interestyo eran. Poloniex lending is not available to US clients. CoinLend can automate lending on Poloniex.
SALT is a crypto lending platform. There is a possibility to become a lender on SALT, but it is reserved for accredited investors.
In this example below the borrower will pay 6.81% APR, this gives lenders an idea of their potential returns.
29. Trade io
Trade.io is an crypto exchange. Investors can lend their funds to the Trade.io Liquidity pool, this pool will be used as the liquidity pool on the exchange and it generates profits through the business of the exchange. These profits are shared as passive income to the lenders of the liquidity pool.
Lendroid is a platform that manages the complete lifecycle management of lending and borrowing of ERC 20 tokens. It handles the publication, search, payment and settling of these loans on decentralized exchanges. The use of these loans is to enable short and long positions.
CredX is a crypto platform that enables the management of loans through APIs. They are doing this by allowing others to build on their systems, the first such user is UpHold.. Their APIs manage the full loan User Experience from start to finish for both lender and borrower.
32. We Trust
WeTrust offer a lending app, which is more akin to a social saving system called Credit Circles
Example of the process
- Four friends agree to create a trust circle.
- Each month the four friends will pay $100
- Each month one of the trust members will get the $400
- The previous recipient cannot receive the collected funds in the next rounds.
The numbers above are examples, the exact rules are agreed upon by all participants in the Trust Circle
The only info on the Vest website is “Stake with trusted validators and diversify your risk. Move in and out of positions with ease.”
Vest seems to be an evolution on the 1protocol, this project was focused on a staking protocol.
Staking needs two items computing power and tokens. The two are not always with the same person. 1protocol would coordinate the resources of the token holder and the computing resources so they can both earn a passive income from staking.
Whalelend is an automated bot which invests on Bitfinex.One advantages is that there is no need to create an account on Bitfinex when investing with Whalelend. The disadvantage that another layer of risk has been added.
While lending directly with Bitfinex there is Bitfinex risk, with WhaleLend on top there is more risks.
Polobot is an automated bot that can generate a passive income on margin funding on both Poloniex and Bitfinex. Polobot manages funds on these platforms it does not hold funds itself, it is free to use but also has a premium function.
PoloBot rate history page has very detailed stats on the history of margin funding.
UpHold’s CredEarn by MyCred. Depositors on Uphold.com (excluding the USA) can earn passive income by locking their crypto for a fixed term deposit for a minimum of 6 months, it can be renewed in six-month increments. Depositors who are willing to enrol in this need to register and do the KYC on the MyCred platform. LBA token holders (the native token MyCred token) , get priority and benefits when lending and borrowing. Interest is paid quarterly in USD. Early withdrawal is not permitted.
Annual interest rates (as of Jan 19)
- BTC 10%
- XRP 5%
- ETH 3%
- USD 3%
- EUR 3%
- GOLD 3%
xCoins is a p2p marketplace for lending bitcoins. Borrowers, borrow BTC and pay back via PayPal. The advantage for borrowers is that they can borrow BTC via PayPal and get it instantly. The advantage for lenders is that they get paid for their BTC and in addition interest.
There are several risks though, borrowers may dispute the payment on Paypal once they have the BTC. If the dispute is upheld the borrowers will get their BTC for free. It seems some users of this system had their Paypal accounts suspended/frozen. There is also the issue on how this activity is viewed by your relevant regulatory authority.
XCoins have a special fund which pays lenders if the investor’s profit margin falls below 50%.
Veritaseum is an autonomous crypto research platform. This research can be accessed y staking Veritasium, the tokens can be either bought or borrowed. It is possible to make passive income from Veritasium coins by lending them on VeRent.
Othera is a blockchain fintech company based down under. It is building software to fractionalize and tokenize loans. In addition, it is then building an exchange on which these tokens (representing parts of loans) can be traded. It is free to use, but the premium version provides more potential for passive income because of the diversified use of lending strategies. In order to use CoinLend, the investor needs accounts on the relevant exchanges.
There are many ways to lend your crypto on these crypto lending programs. The industry is new and there are many risks to consider.
- Lending is risky, you are never sure if your capital will come back.
- Lending for peanut interest rates is even riskier because the interest just does not justify the risk.
- Lending, while your capital is losing purchasing power, is extremely risky as you end up with less purchasing power than when you have started.
- There are also risks we do not know about. Lend your crypto very carefully!