Lending Dapp Development

Lending

Most of the time, crypto investors are advised to hold their assets until they appreciate in price. But while this is the case, you may not want to leave your crypto idle in your wallet. This is when you start thinking of ways to help grow your digital currency, and one of the ways you can do that is through crypto lending.

Crypto lending involves one party lending cryptocurrency to another party in exchange for interest payments. At its core, crypto lending works similarly to traditional lending: someone needs more cash than they have on hand, and someone else lends them this money and charges interest.Crypto lenders deposit their cryptocurrency on the lending protocols that are then lent out to borrowers in return for regular interest payments to the lender, generally calculated as annulling percentage yield (APY).

Where to lend?

There are two main types of crypto lending platforms: decentralized crypto lenders and centralized crypto lenders. Both offer access to high-interest rates, and both typically require borrowers to deposit collateral to access a crypto loan.

To become a crypto lender, users will need to sign up for a lending platform and select a supported cryptocurrency to deposit and send funds to the platform. On a centralized crypto lending platform, interest may be paid in the lending asset or with the native platform token. On a decentralized exchange, interest is paid out in the form of lending assets, but there may also be bonus payments.

CeFi exchanges, like Binance, or decentralized finance (DeFi) protocols like AAVE let us borrow or lend out our crypto in return for interest. The interest rates typically range between 1-20% APY/APR and will vary according to whether you use a DeFi or CeFi platform.

Benefits of Lending Crypto

Loaning out (Lending) allows you to use your digital assets to generate dividends by lending out part or whole of the holdings.The interest rates you can earn by lending vary quite a bit, as mentioned earlier, and commonly fall between 1-20% for most cryptos. These rates are generally higher compared to the average traditional banks' savings account interest rates, which in the US sit at just 0.1% APY. So this way, your digital currencies can offer you some value in return. So, it is a great opportunity to make some money, especially if you need extra funds to cover different expenses or pay debts.

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Borrowing

Crypto borrowing is a secure loan in which users get crypto or cash (stablecoins) liquidity from a lender, offering cryptocurrencies owned by them as collateral by paying an interest rate.

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Why borrow?

Of the various reasons someone might want to borrow crypto, releasing liquidity is among the most likely. Those with a large chunk of their wealth in crypto can find themselves in a curiously annoying position when the crypto markets boom. Their assets rising in value is obviously ideal, but as soon as they sell any of their assets, they’re liable to pay, often pretty heavy, tax according to the law in their respective countries.

If, however, they use those crypto assets as collateral on a crypto loan, they can have cash in their pocket without giving up any future price rises — and without paying tax. If the markets dip, however, their collateral is liquidated and they keep their loaned cash. And if the markets rise, they can buy back their collateral for lower than its current market price, sell it and then keep the difference as profit.

Borrowing stablecoin while having volatile assets in collateral lets you keep exposure to the volatile asset. For example you can lend ETH and borrow USDC which will provide you with the liquidity needed but still give you exposure to ETH.

Borrowing also allows you to trade using leverage. You can Supply ETH and borrow USDT which you can use to buy more ETH.

In general, as long as the borrower makes the payments and pays the loan amount in full, they get their crypto back at the end of the loan term.

As mentioned earlier, CeFi exchanges, like Binance, or decentralized finance (DeFi) protocols like AAVE let users borrow or lend out their crypto in return for interest. The interest rates typically range between 1-20% APY/APR and will vary according to whether you use a DeFi or CeFi platform.

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Lending Dapp Development Service

We have quite a bit of experience in creating secure lending protocol with customizable features such as opitmal utilization slopes, integrateion of ve(3,3) tokenomics, yield farming and much more.
You can send us a email to inquire more about what we can do for you.