Bitcoin entered the markets in 2009 as the world’s very first decentralized virtual currency. Since then, it has increased in value to the point where it is viewed more like gold and precious metals than a digital, peer-to-peer currency. People across the world have been buying up bitcoin and altcoins as an investment strategy, and in many cases, it’s paying off.
The benefits of decentralized cryptocurrencies are obvious. They don’t rely on banks or other traditional financial institutes, can be used anywhere in the world with an Internet connection, and increase the autonomy and privacy of digital transactions. The benefits of bitcoin lending over purchasing it on exchanges are equally impressive, but even many die-hard crypto enthusiasts are still relying on expensive exchanges instead of taking advantage of lending platforms. Read on to find out why that should change.
What Is Bitcoin Lending?
Before discussing the unique advantages of secure bitcoin lending, it’s worth taking a moment to establish a clear definition. Bitcoin lending is a process that allows people who own bitcoin to lend it to other traders for a certain period of time. The lenders keep the bitcoin as collateral, and the borrowers either pay back what they owe with interest in cryptocurrency or they keep the bitcoin and pay off the loan in fiat currency. The best part is, these transactions all take place securely online at xcoins.io instead of requiring either party to go to a bank.
There are two primary reasons to borrow bitcoin. Most borrowers are either interested in margin trading, or they’re taking out a bitcoin loan for personal purposes. Lenders offer borrowers access to bitcoin loans as a means of making money off the interest, regardless of what the borrower intends to do with the crypto funds.
General Benefits of Bitcoin Lending Platforms
Regardless of which motivation is driving borrowers to consider bitcoin borrowing, there are a few advantages that apply to all situations. They include:
Ease of Use
Crypto enthusiasts who are used to buying bitcoin on exchanges will love secure bitcoin lending platforms. They work just like an exchange, at least on a practical level. The borrower gives money to the lender, who then gives the borrower a predetermined amount of bitcoin. The borrower then returns the bitcoin to the lender and gets back his or her investment, minus any fees and interest. It’s all very easy to get used to.
On secure lending platforms, lenders compete with each other to offer the lowest interest rates to borrowers. The interest is paid along with the loan security deposit and does not change depending on the loan term. Borrowers simply pay the loan origination, payment processing fee, and interest fee, put down a security deposit and get their bitcoin instantly with lower interest and fewer fees than those found on traditional exchanges.
Shorter Processing Times
Most exchanges won’t allow users to purchase bitcoin on credit. Buyers must purchase bitcoin using bank transfers, which can take a week or longer to process. They submit multiple forms of identification, proof of residence, and other relevant personal information before even being able to initiate the transfer, which usually comes with wire transfer fees of $50 or more. The combination of often exorbitant fees and long wait times to receive the bitcoin turned a lot of potential investors off and made it impossible to purchase bitcoin using credit.
With peer-to-peer lending platforms, all of those hurdles go out the window. Borrowers can originate a loan in minutes using a debit or credit card instead of having to worry about wire transfers and their associated fees, burdensome proofs of identity, and long wait times. The advent of secure bitcoin lending platforms has opened up the world of cryptocurrency to a much wider audience.
Benefits of Lending Bitcoin on a Peer-to-Peer Platform
The advantages defined above apply equally to borrowers and lenders. Though it’s clear that peer-to-peer platforms sometimes force competition between lenders to offer lower interest rates, which is an advantage for borrowers, lenders still have plenty to gain. The benefits of bitcoin lending include:
No Need to Get Rid of the Bitcoin
Crypto enthusiasts are often hesitant to unload their bitcoin because they know the price could skyrocket again at any moment. Just keeping all that unused bitcoin in a crypto wallet prevents it from circulating. Bitcoin lending helps to keep crypto in the markets where it can be traded or used to pay for goods and services without requiring lenders to sell their assets. The borrower will get access to the bitcoin for investment or trading purposes, then pay it back when the loan term is up.
There are plenty of crypto exchanges out there that are well-secured, but for every legitimate exchange, there are also multiple platforms with potentially serious security flaws. Secured peer-to-peer lending platforms take substantial steps to protect their users from hackers and scammers. Borrowers never have to worry about paying for bitcoin that never reaches their wallets since loans only originate when they are matched up with lenders that have sufficient funds, and serious platforms take steps to protect all sensitive data.
Generate Passive Income
Unlike day trading bitcoin, which requires a good deal of specialized market knowledge, lending is a good way to generate passive income. Even if the borrower chooses not to repay the loan in cryptocurrency, the lender will get back what the bitcoin is worth in fiat currency, plus interest. The best part is, the lending platforms do all the legwork, so it requires next to no effort beyond starting and funding an account.
The Bottom Line
Secured peer-to-peer bitcoin lending platforms are growing in popularity as Bitcoin and altcoins continue to gain traction among mainstream consumers and investors. Chances are, this trend is here to stay. Investors who want to leverage the power of their current bitcoin holdings without resorting to using potentially insecure exchanges or unloading substantial assets should look into peer-to-peer lending now to find a better way to make money off of cryptocurrency.