Can cryptocurrency be used for loans? Many people are wondering if they can use their Bitcoins as collateral for a loan. In this blog post, we present a quick tutorial on how people are using blockchain for lending.
30 December 2019 | AtoZ Markets – Over the past few years, the idea and notoriety of cryptocurrency have reached various peaks and valleys. It’s been heralded as the new standard in terms of money, as well as chastised for whatever reason the critics can find.
The fact of the matter is that cryptocurrency and the technology behind it—blockchain, is not going anywhere. It is increasingly becoming the new standard in terms of secure transactions on the internet. And as much as it has a ways to go in influencing major markets outside of the net sphere, its implications as a secure means of moving information and numbers are, so far, unparalleled.
This brings us to the latest means through which people are using blockchain: lending.
Mechanisms of crypto loans
The mechanisms by which cryptocurrency in the lending world operates is not much different than traditional means. What changes is the means and class of asset to the table? There are still interest rates and means of collateral that are at play. In the end, the variables that exist are within the interest rates and how you transact the money.
If you’re not absolutely clear on how it goes, there are various summaries and updated blogs that address the ins and outs. Your best bet is Blockchain Lender Overview when it comes to loan specific details. But at the very base, you interact with agents and lending firms that ask the exact same things that other lending firms ask for in the realm of traditional currency.
The basis of all these loans lies in the concept of Decentralized Finance. This is the core through which many internet gurus and moguls base their cryptocurrency holdings on. It’s the idea that they’re not beholden to a single authoritarian entity that determines things like interest rates and the value of the currency.
Blockchain and the mining sector, along with new merging factors, ultimately determines the value. Because of that, it’s become an incredibly popular move to lock one’s crypto assets as collateral and using that to taking liquid loans and gaining traction in the market from that viewpoint. From that point, the world of crypto-lending options grew to insane heights.
Ways and means of cryptocurrency lending
The new and updated forms of lending in the cryptocurrency world have been shaped by management principles that stay true to the decentralized model of blockchain currency. You have various forms such as Margin lending. This means that the lender chooses the interest rate on a given host of currencies.
Another type is Crypto-to-crypto lending. This when you dole out from your own pool of cryptocurrency to individuals that are dealing exclusively in crypto, to the conversion of cryptocurrency to fiat. All of these options have their own upsides, depending on what you want to do with the money.
Cryptocurrency has been taking the financial world by storm with its various options and applications. Lending is just the beginning. From this point on, the projections are expected to hit even further heights. And when it comes to innovation, whether financially or otherwise, being on the side of history do you well.