When it comes to investing in cryptocurrencies, trading is the most popular method adopted by investors. Nowadays, cryptocurrencies have revolutionized how we do our business, raise funds, and make investments. Trading cryptocurrencies are the fastest and easiest means of generating profit for the crypto enthusiast. Besides trading, there is another means of earning profits and this is through crypto lending.
Crypto lending or digital asset backed loan is comparatively a new concept used in earning profits without much effort. It revolves around the concept of shorting. Perhaps, you do not understand how shorting works, do not worry because all you need to know is that you are lending fund to others who are making short trades. In exchange for the funds, you get an interest rate that goes from 5% to 50% each year.
The interesting thing about the crypto-backed loan is that you do not have to worry about the borrower running off with your funds. Furthermore, the exchange holds the funds and does not allow the borrower to withdraw their funds without settling their digital asset backed loan.
The unique side of loans backed by cryptocurrency
Digital asset-backed loans are unique opportunities for borrowers to get funds for whatever project they want. More uniquely is the fact that setting up a lender account on a crypto lending platform like InLock is easier. Furthermore, the experience is amazing when compared to seeking loans from our traditional bank.
Additionally, users do not have to keep a close eye on their funds. Unlike day traders, crypto leaders do not require fast actions. Nonetheless, most platforms such as InLock have means of ensuring that lenders get automatic interest rates and funds.
Moreover, crypto-backed lending comes with lower fees because lending in fiat currencies needs P2P providers to cooperate with banks in order to conduct transactions on their behalf. However, cryptocurrencies are independent of banks.
What are the risks of digital asset backed loan?
While there are inherent risks in digital asset backed loan, platforms such as InLock have created means of reducing such risk for both lenders and borrowers. For instance, in the issue of platform security, InLock has designed its platform in such a way that every security breaches are solved, making it hard for hackers to steal funds.
InLock’s lending platform removes the need for additional credit assessment because the borrower provides the collateral, which is in the form of crypto assets. The InLock platform uses smart contracts to ensure a level playing field between the lenders and borrowers. The InLock system is not primarily for lenders only because other financial institutions and banks can compete for customers, which is why interest rates get as low as possible.
With everything outlined, crypto lending could be the easiest means of earning passive income. Remarkably, this method of earning income does not require fast decision or time. Furthermore, it is a popular alternative for people who are interested in crypto trading but do not have adequate time to run a profitable trading practice daily.