Crypto Lending 101: Making The Most Of Your Idle Digital Assets
Detroit, Michigan
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April 03, 2024 08:25 AM Eastern Daylight Time
By Austin DeNoce, Benzinga
As the cryptocurrency market evolves, so, too, do the financial services built around it. Cryptocurrency owners can now even generate passive income through lending and securing loans using their cryptocurrency assets as collateral. However, in an industry notorious for bankruptcies and fraud, carefully navigating the complexities inherent to such financial services is extremely important.
While there is no shortage of lucrative opportunities in crypto, balancing those opportunities with the safety of your assets should always be a top priority. Picking the right services or platforms is a major step in the right direction, but it’s also useful to familiarize yourself with the financial products you’re considering so you can make the most informed decision that doesn’t jeopardize the safety of your assets.
What Is Crypto Lending?
Crypto lending falls into two main categories: earning interest by lending out your crypto and using your crypto as collateral for loans. The former allows crypto holders to earn attractive yields on their assets, ranging from a few basis points to double-digit annual returns in many cases. The latter allows crypto holders access to liquidity via loans at competitive rates without selling their cryptocurrency assets and creating a taxable event.
Essentially, crypto lending platforms allow you to deposit your crypto assets to earn additional returns over time from those borrowing your funds, or you can be on the other side of the transaction, getting access to dollars or another currency without selling your crypto, which can provide a lot of flexibility.
Crypto Savings Accounts
As one example, crypto lending platforms like Ledn.io offer Growth Accounts that enable cryptocurrency holders to earn up to 11% annual percentage yield (APY) on their BTC, ETH, USDC or USDT holdings (disclaimer: these products are not available in Canada or the USA). However, as mentioned previously, returns are just one part of the equation. The safety of your funds is also paramount, so Ledn prioritizes transparency and the selection of what it considers reliable digital assets, which isn’t always the case for other lending platforms in this space.
Lending your assets generally opens you up to credit risk, which can quickly make attractive returns meaningless if things go south. Luckily, customers on platforms like Ledn can enjoy the peace of mind that comes with the company’s strict risk management policies, including a single-asset ring-fenced approach for its Growth Accounts, and its monthly Open Book Reports that offer insights into how the interest for its savings or Growth Accounts is generated.
Crypto-Backed Loans
Crypto loans are typically categorized into Centralized Finance (CeFi) and Decentralized Finance (DeFi) loans. CeFi loans are managed by centralized platforms like Ledn.io, which oversees the lending process, including interest rates and risk management. DeFi loans, on the other hand, operate on blockchain platforms through smart contracts without a central authority. Each type offers distinct advantages and risks, with CeFi providing a more regulated environment and DeFi offering more autonomy and potential for higher returns but also more complexity.
Ledn.io provides crypto-backed loans that give you access to funds without selling your Bitcoin or Ethereum. You can use BTC or ETH as collateral to receive 50% loan-to-value loans, typically within 24 hours, with the freedom to repay anytime penalty-free. Loans are offered in USD, USDC or your local currency and start at a 12.4% annual interest rate. If you choose to go with a Ledn Custodied Loan, your collateral is held in custody with qualified custodians and/or banks and is not lent out to generate interest. Ledn.io’s crypto-backed loans require a minimum of $1,000 in BTC or ETH as collateral.
To reassure customers, Ledn says it is the first digital asset lending platform to complete a Proof-of-Reserves Attestation where customers can confirm balances themselves using a hashed ID.
Exploring The Opportunities For Your Crypto
If you are interested in putting your crypto to work or exploring the various financial opportunities your crypto assets can provide, Ledn.io offers a compelling choice. Whether through earning passive income or securing loans, your idle crypto assets can open doors previously limited to the legacy financial system. With up to 11% APY on deposits, transparent operations and robust risk-mitigating measures, Ledn says it is at the forefront of making crypto lending both profitable and secure. Its emphasis on customer control, security and an open approach to risk management potentially makes it a valuable partner in the crypto lending space.
Begin your crypto lending journey with Ledn.io by clicking here!
Featured photo by Traxer on Unsplash.
Ledn builds innovative financial products with a mission to make generational wealth more accessible through digital assets. The company issued Canada’s first bitcoin-backed loan in 2018 and has issued nearly $5B loans since. Ledn is proud to help clients in over 130 countries access credit and savings products to grow their digital wealth. For more information, visit ledn.io.
This post contains sponsored content. This content is for informational purposes only and is not intended to be investing advice.
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