Disclaimer: Flint does not endorse any of the platforms mentioned in this article in any capacity. Readers are advised to research into the risk aspects of these platforms before making any investment.
In the world of traditional finance, the concept of lending is as old as the time when civilizations started. A person who needs to borrow money needs to approach an institution called the bank. Lending, in any system, serves a dual purpose of fulfilling the requirements of both the borrower who wants money to fulfill their requirements and the lender who wants to earn an extra amount on their holdings.
Similarly, the concept of lending has been adopted in the world of web3 through the system called decentralized finance (Defi). Any cryptocurrency holder can deposit their crypto assets with the lending platforms and earn interest on them. Similarly, a borrower can borrow the crypto assets for a fee on the loan. The borrowed money is used for hedging, speculation, etc.
The difference between the fee received from the borrower and the interest paid to the lender is the amount earned by the lending platforms. Crypto lending services are available in both centralized and decentralized platforms.
There are 3 parties involved in crypto lending:
This is how the lending process works:
As crypto assets are one of the most volatile assets in the market, to obtain a loan, a user has to deposit more cryptocurrency than its actual loan value. And hence, this is called over-collateralization i.e more collateral has to be offered than the actual loan amount.
Flash loans are the loans that are transacted and repaid in the same transaction. Flash loans are based on smart contracts. The first step in flash loans is receiving the loan, the second is using the loan for a productive purpose, and then finally paying back the loan in a rapid process. They are mainly used for arbitrage opportunities, collateral swaps, etc.
Here are the top 4 crypto lending platforms in July 2022
In the world of decentralized finance, Compound is one of the known names for lending and borrowing. As a platform, it allows users to borrow 15+ tokens starting at 1% APR. The platform is highly secured and backed by BitGo.
Aave is one the most famous and trusted decentralized lending platforms which also allows users to stake their crypto assets and get loans against the collateral. Users deposit their assets into a liquidity pool and in turn the protocol lends out the same. Aave is built over the Ethereum blockchain and utilizes ERC-20 tokens. As an upgrade, Aave can be assessed over other blockchain platforms as well such as Solana, etc. One can borrow loans and flash loans starting at 1% APR and can choose from 30+ supported tokens on the platform.
CoinRabbit is one the leading and fastest crypto loan provider solution available in the market. The platform supports lending against 38+ tokens and users borrow the funds at 14% borrowing rate. The platform is secured via cold wallets and storages.
Nexo is one of the world-leading lending companies in the decentralized world. Nexo allow users to borrow funds starting at 0% APR. Funds at Nexo are secured at leading crypto custody solutions such as BitGo. The platform supports all the leading token and hosts a total of 35+ token on its platform.
Here is an infographic comparing the top crypto lending platforms for July 2022
If you haven't already, you should read our article on top players in crypto staking to understand a very important aspect of DeFi
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