voyager: Best Crypto Lending platforms. How to earn on crypto loans in 2022
BD & Partnership Head
Which crypto lending platform would you recommend and why?
Crypto Lending Platform can be divided into CeFi (Centralized) and DeFi (Decentralized). CeFi is further divided into Exchanges and Platforms. Exchange: Binance, Gemini, VAULD, CoinDCX, etc; Binance has multiple crypto assets for stalking and also has SAFU insurance so is probably the safest, while CoinDCX gives 16% APY on stable coins. Platforms: NEXO, Celcius; Voyager, HARU, CABITAL, B2C2; Celcius had a good reputation but the recent BadgerDao hack exposed that they deploy user funds directly onto other platforms using Metamask for earning yield. So although user funds are protected, the act itself sets dangerous concerns. NEXO & HARU are similar in their ways of earning interest. CABITAL is a new entrant who are trying to do everything in a compliant manner. DeFi : MakerDAO. COMPOUND, AAVE; For ETH-backed loans, MakerDAO has is the better choice. COMPOUND gives COMP tokens (2-3%) to both borrowers and lenders. While AAVE has the max no of digital assets supported on its platform along with being the pioneer for providing flash loans.
How to earn on crypto loans?
So, for individuals, the main challenge is depositing fiat to crypto, so if you are considering saving in USD, you might as well take the opportunity to save in USDT as this would give higher interests than banks. So, any platform offering direct fiat deposit and conversion should be considered more profitable than using OTC to send USDT to the platform. In CeFi, Binance has many assets for staking and also the security of SAFU funds so most users can directly use it. In DeFi, COMPOUND is the better choice for individuals as they also get COMP tokens. Also, CABITAL, VAULD, etc offers direct deposit of FIAT and good yields on staking. For Institutions, choosing a platform should depend on the legal standing and in this regard, B2C2 & CABITAL is the better choice for CeFi and AAVE for DeFi. CABITAL is doing everything to get the related regualtory approvals while B2C2 is one of the largest market maker owned by SBI Capital. AAVE is the next generation of DeFi to invest in supporting the highest no of Crypto assets for asset collaterilization.
What are the main risks in the crypto lending process?
Crypto lenders earn interests in a few ways which are - 1. Borrowers pay high interests to Lenders to get loans for getting USDT for trading and this can well be over 30-40% annually. 2. Lenders can directly contribute to CeFi projects and they invest in other DeFi or lend to borrowers while lenders get a fixed yeild. 3. Lenders can directly contribute to USTD pools in DeFi and the DeFi allows borrowers to borrow against collateral. 4. Lenders can also put their USDT in the Binance (or other Crypto exchange) leverage pools and depending on market trends can earn profits, but this is strictly for technically equipped personnel. Risks- 1. DeFi hacks - Celcius had a good reputation but the recent BadgerDao hack exposed that they deploy user funds directly onto other platforms using Metamask for earning yield. While the process itself is normal but using a Metamask wallet exposed it to the front end hack suffered by Badger DAO. 2. In Sept, 2021 COMPOUND accidentally gave away 280K COMP tokens due to a pushing ahead with a bugged update, the reverse might also happen and users might loose funds due to vulnerabilities. 3. Besides backend and frontend vulnerabilities, smart contract vulnerabilities too can cause users to lose funds. 4. Last, but not the least if the yeild is too good to be true, it could definitely be a scam so do a through background check about the CeFi or DeFi before investing.
This is not a financial advice. Please do your own research and consider the risks of trading cryptocurrencies.