Crypto Lending Platforms – A New Frontier in Peer-to-Peer Finance

Crypto Lending Platforms – A New Frontier in Peer-to-Peer Finance

Crypto lending is an excellent way of divers, the gloom on DeFi can feel daunting, with hundreds of competing platforms.

Do yourself a favour before investing in any platform: compare their fees, their minimum deposit and collateral limits, and their track records for risks to security.

Getting Started

Large digital asset owners who prefer to monetise their holdings passively rather than selling outright will embrace such platforms to generate returns via loan-outs, making a good crypto-lender indispensable.

Once this process starts, the borrower needs to register and undergo KYC with the lending platform before depositing the crypto they want to borrow, and then setting parameters for loan duration and interest rate.

Then the platform matches those funds with borrowers looking for loans and assigns them to one of its liquidity pools, where investors can search through available loan requests and decide to fund them. Sometimes borrowers also post cryptocurrency collateral as guarantors for the loan, before lenders re-lend or withdraw earnings or withdraw them after the fact. In an attempt to limit risk, lending platforms select borrowers carefully and require collateral – the cryptocurrency eft – for the loans they offer.

Collateralized Loans

When you deposit your coins into a crypto lending service, you can expect interest in the double-digits, which makes it one of the highest yielding savings accounts – if not the highest.

You need to compare rates on various shopping platforms, preferably one with fund insurance, cold storage facilities for your cash and/or crypto, as well as services in your area regulated by a governmental body. Either way, make sure that you are aware of minimum deposit limits and/or required fees, if any, before opening an account with one platform over the other.

Other protocols offer collateralised tokens that secure lending against assets worth more than the value of the loan, mitigating risks for lenders; speeding up decision-making processes; limiting further on-chain bulkiness; and smoothing out adjustments for ceilings on borrowing or caps on lending amounts that decentralised lending requires. Such collateralised tokens are more volatile than unsecured tokens and subject to margin calls should the collateral dip below a collator’s chosen value threshold.


Crypto lending platforms take cryptocurrency that users deposit, lend out (to earn interest for the lenders) and borrowers have to make repayments. To lend money through the platform, users have to pass verification and escrow checks.

Such liquidity risks also affect borrowers: without universally recognised auditing standards, or form of proof-of-reserves, or FDIC insurance, cryptocurrency trading platforms are at risk of market contagion and liquidity failure.

Hence centralised crypto lending protocols perform credit checks and conduct additional applicant risk assessments to avoid defaults and liquidity issues. Decentralised lending protocols often leave this process to smart contracts, which, in layman’s terms, are still managed by humans, sometimes at their own detriment. Even experienced lenders risk getting margin-called if their collateral dips below certain levels and get their funds liquidised without immediate action, which indeed has cost some of them their funds.

Passive Income

You can use your crypto for earning passive income. Crypto lending is a similar concept to staking, but in this case you would receive interest payments every week or month.

The interest you pay or earn varies depending on the collateral – whether it’s coins or stablecoins. Platforms and coins have different interest rates. Look before you leap!

With security features such as fund insurance and cold storage solutions, searching for those platforms offering will help minimise your risk from hackers, which is an ongoing threat.


Just like crypto exchanges, crypto lending services match borrowers and lenders but under smart contracts and with digital assets as collateral. Some platforms return higher yields than others but using the service entails an element of risk, including the borrower committing fraud.

Many crypto lending providers set a minimum amount of deposit along with lock-in periods and some CeFi platforms make use of KYC, AML and other regulations to protect assets, as well as most CeFi platforms have varying degrees of custody of their deposits, along with customer identification and verification procedures, such as photo ID or proof of address. These rules make CeFi platforms incompatible with truly unlimited liquidity, which comes at a certain cost.