Lending in crypto is a process where users deposit assets into protocols to earn interest or provide liquidity for borrowers. It is facilitated by smart contracts on decentralized platforms.
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Questions & Answers
What is blockchain lending?
Blockchain lending is a decentralized method of borrowing and lending digital assets using smart contracts, ensuring transparency and security without intermediaries.
What is a crypto loan?
A crypto loan allows users to borrow funds by using their cryptocurrency holdings as collateral. These loans are often provided through DeFi platforms and do not require traditional credit checks.
Do crypto loans without collateral exist?
Yes, crypto loans without collateral exist, but they are less common than secured loans. These unsecured loans are based on creditworthiness or reputation and often come with higher interest rates and stricter eligibility criteria.
Why should I use blockchain lending?
Blockchain lending allows you to use your crypto as collateral without risking its loss. You can borrow funds to invest in more crypto or other assets while retaining control of your original holdings.
Can I borrow more than the value of my crypto collateral?
No, most platforms limit the loan value to a percentage of the collateral’s worth (LTV ratio) to reduce risk. Some platforms may offer higher ratios depending on collateral type or borrower’s creditworthiness
What are the risks of crypto loans?
Crypto loans carry risks such as potential liquidation if collateral value drops. The volatility of cryptocurrencies can lead to forced repayment or asset liquidation. Unsecured loans may also have higher interest rates.