| # | Name | Chains | 1d Changes | 24h Volume | 7d Volume | 1m Volume |
Crypto lending is investing in loans, using crypto assets instead of fiat money (fiduciary money such as the euro, the dollar and other currencies). In other words, you can use your cryptocurrency portfolio to get a return similar to a fixed-term deposit. The big difference with the traditional system is that the investments are backed by collateral in cryptocurrencies regulated by a smart contract.
A person needs money and has, for example, some bitcoins. This person requests a loan and his bitcoins remain as collateral. If you return the debt on time, then everything is correct. If you do not repay the debt, the bitcoins are returned to you minus the part of the debt and interest. All this controlled or established in a smart contract; that is, everything is programmed and automated in this way.
The most common and frequent critpolending is leaving or lending your money to another person or institution. In exchange for the promise of payment and interest. In this type of investment, it is not just a promise to pay, but blockchain technology ensures that the person pays one way or another.
As we know, the loan is a figure where two people are constituted, the lender and the borrower. The first is the one who delivers an amount of money to the second, with the commitment that the latter will return it within a period that both parties can freely agree.
With the emergence of the banking sector, banks are in charge of granting loans or credits to other users who require the funds for various reasons: housing payment, capital integration in businesses, initial investment for a venture, etc. What do banks earn when they grant loans? They charge an interest rate on the amount borrowed.
If, for example, a bank lends us 100 dollars with an interest rate of 10%, then we will have to return 110 dollars. Despite the fact that banks also grant savers an interest rate for keeping their money in bank accounts, the real winners in loans are the financial institutions themselves.
Profiting with other people's money is precisely one of the most negative points that many cryptocurrency philosophers see against the institutionalized banking sector. And faced with this reality, cryptocurrencies have arrived to change the financial system as we know it.
We can say that cryptolending could be subdivided into two types:
Loans directly in cryptocurrencies: The lender gives the borrower an amount of a specific cryptocurrency and the latter agrees with the former to deliver the same amount of coins after the period of time that both have agreed. There is no relevance in the fact that the currency delivered in the loan rises or falls in price in correlation to FIAT currency, the borrower is obliged to deliver the same amount of cryptocurrencies that he received from the lender.
Loans in FIAT currency backed by cryptocurrencies: In this case, the lender gives the borrower an amount in a specific FIAT currency, it can be the dollar, the euro or the Argentine peso, the parties agree on it. However, in order to receive this amount in FIAT currency, the borrower must provide a specific amount of cryptocurrency as collateral for the loan. Once the borrower returns the agreed amount of FIAT money, the lender will return the cryptocurrencies delivered as collateral.
Considering that cryptocurrency transfers are irreversible, we could conclude that crypto asset lending is designed for all possible scams and frauds to happen. However, in practice this is not the case thanks to the existence of intermediaries.
How? Intermediaries? Didn't we say that in cryptocurrencies everything works from person to person? Yes, it is true, crypto lending is possible to execute operations in a P2P way, but it is not the only way in which it can be done. The intermediaries would become platforms that work to connect and ensure the operation between the parties through smart contracts. We must understand that in a wild market like this, it is normal for there to be methods that seek to secure operations.