Selection By  Artem Khomenko
Normal 2736 25 Oct 2022

Crypto lending: Top 5 services

By  Artem Khomenko 2736 25 Oct 2022
Photo - Crypto lending: Top 5 services

Crypto-lending is a process when the user's cryptocurrency is used as collateral for taking a loan.

Crypto lending is a good way to use your cryptocurrency without having to sell it. The user pledges his own coins as collateral, for which he receives USD, EUR, stablecoins or other tokens for use. Loan to collateral (hereinafter referred to as LTV) is usually in the range of 60-80%. That is, for $100 in cryptocurrency, the borrower receives a loan of $60-80, which he returns with accrued interest.

Or vice versa: the user provides his own funds at %, which the platform allocates as loans to other traders. Profitability here depends on the site, liquidity and the chosen crypto.

Lending is often an additional tool on centralized cryptocurrency exchanges. Traders can manage their money inside the platform without withdrawing funds to third-party resources. But most exchanges use ready-made landings, that is, the user works with some kind of credit protocol through an intermediary.

Here is a list of the most popular lending services where you can borrow tokens secured by crypto, or become a lender yourself by providing platforms with your own coins:

AAVE

One of the largest landing protocols on the market. The platform has the ability to borrow and lend cryptocurrencies in 6 networks - Avalanche, Optimism, Polygon, Phantom, Harmony and Arbitrum. Percentage per annum for the provision of own funds on credit reaches 10%. LTV is at the level of 60-80%, depending on a particular coin.

The project has a native AAVE token, the current value is $81.75. The capitalization of the project is $1.1 billion, which puts AAVE in 46th place in the rating of crypto-assets according to Coingecko.

AAVE credit protocol starting page

AAVE credit protocol starting page

Compound

A major financial protocol that runs predominantly on the Ethereum blockchain. Other EVM networks are also available, but their liquidity is much lower. LTV for some tokens reaches 83%, and borrowed pools allow you to deposit funds at 5-10% per annum. There are also algorithmic stablecoins on the platform. For example, the digital FEI USD can be borrowed at a staggering 112% per annum. Naturally, farming algorithmic stables is a risky undertaking, which is confirmed by short-term deposits (losing the peg) of the Fei USD itself, which at the moment fell to $0.94.

The native token of the COMP project is trading at $52, with a market capitalization of $358 million.

Compound platform statistics

Compound platform statistics

KAVA

A credit protocol that, among other things, has the attributes of a decentralized exchange. On the website, you can not only borrow and lend cryptocurrency, but also staked stablecoins with a yield of 30% per annum, make swaps, put funds into farming and liquidity pools, vote for changes in the project as part of a DAO, etc.

The landing page has the main KAVA token, which is in 96th place in the rating of crypto projects with a capitalization of $417 million, as well as an additional HARD coin, which is involved in exchange transactions within the platform.

Recently, the protocol has integrated a bridge and added support for the EVM network, which greatly simplifies interaction with the Ethereum blockchain. 

Tokens available for credit operations on KAVA

Tokens available for credit operations on KAVA

VENUS

A credit protocol running on the BSC network. Venus is often used by cryptocurrency exchanges as a landing page through which the marketplace allows you to borrow funds. The volume of blocked funds reaches $1.2 billion, TLV fluctuates in the range of 55-80%. The protocol supports stablecoins TUSD, BUSD, USDT, DAI, cryptocurrencies DOT, XRP, MATIC, LTC, BTC and many other coins. Some tokens, such as TRX and CAKE, can be borrowed at 7% and 21% per annum, respectively.

The internal VENUS token, XVS, is trading at $4.5. The capitalization of the project is $68 million. They also have launched its own algorithmic stablecoin VAI, which users can mint directly on the website.

Venus platform statistics

Venus platform statistics

Alpaca Finance

Despite the funny name, Alpaca is a pretty serious landing page in the BSC blockchain ecosystem. The TVL of the project (Total Value Locked, the amount of blocked funds) is $500 million. A cross-chain bridge to the Fantom network was recently launched, but so far there is only $8 million of liquidity.

The platform makes it possible to borrow and collateral various tokens - stablecoins, ETH, BTC, coins of cryptocurrency exchanges and platforms. It has its own algorithmic stable AUSD, staking of which brings up to 8% per annum. It is worth noting that recently, AUSD was depegged and "unstuck" from the dollar. The current value of the coin is $0.95.

The native ALPACA token is trading at $0.29. Market capitalization $44 million.

The platform also has a DEX exchange interface, the ability to farm tokens with 8X leverage and NFT marketplace.

Alpaca Finance landing page

Alpaca Finance landing page

Speaking about credit protocols, one cannot go without mentioning the large Celsius Network landing page. During a large crypto market drawdown, the project froze the ability to deposit and withdraw funds, as well as make any transactions with invested tokens. According to some reports, due to incorrect risk management by the Celsius team and the depegation of the wrapped stETH token, which formed the basis of the company's reserves, users have lost up to $ 3 billion on the platform in total.

The tens of millions of dollars withdrawal reports by members of the Celsius management added fuel to the fire. This caused a flurry of criticism in the community, which suspected the landing page of forming a financial pyramid. At the moment, the bankruptcy case of the credit protocol is going through a trial, which has already resulted in the publication of confidential data of all Celsius users.

Therefore, we should be careful with the choice of lending protocol and carefully understand the mechanics of the circulation of funds within the platform.