4 facts about crypto-backed lending

Crypto-backed lending is one of the most popular sectors within DeFi. Crypto lending provides a faster, more accessible alternative to traditional loans and usually comes with better loan terms, too. 

Here are four facts about crypto-backed lending you should know:

1. Combined, the three largest DeFi lending platforms had $7 billion worth of assets deposited on their platforms in 2020 – a growth of 734% from the previous year

(source: cryptostudio.com)

The explosive growth in the amount of assets on crypto lending platforms shows how these companies are rising to fill the growing demand for crypto-backed lending services. It’s also a reason why government regulators are racing to develop rules for the industry.

2. Crypto loans on Ethereum-based lending protocols have generated an annual interest of $687 million

(source: dailyhodl.com)

Ethereum is at the center of DeFi and also plays a major role in developing smart contract technology, a key part of crypto-backed lending. The amount of interest generated by different crypto lending companies each year shows how profitable the industry is for both the platforms and lenders.

3. The crypto lending market is projected to be worth $27 billion by 2028, with a compounded annual growth rate of 18.13% from 2021 to 2028

(source: prnewswire.com)

The projection for crypto lending’s future shows it’s not going anywhere anytime soon. As one of the fastest-growing industries in DeFi, crypto lending is already worth billions of dollars and has helped DeFi platforms transform from small startups into fintech giants.

4. Crypto lending offers interest rates on altcoins anywhere from 3% to 8%, and as high as 10% to 18% for stablecoins

(source: stilt.com)

One of the many reasons DeFi lending is so attractive to lenders is that the interest rates are much higher than traditional banks. While there’s a greater demand for stablecoins, Bitcoin, and other big-name cryptos, you can still find great interest rates for smaller altcoins as well.

Future of crypto-backed lending 

These facts on crypto-backed lending show that crypto loans are already disrupting the traditional lending market with their accessibility, flexibility, and speed.

The Securities and Exchange Commission (SEC) has been looking to regulate crypto lending for a while by getting companies to register their products as securities. Most recently, BlockFi agreed to do just this, as well as pay the SEC a $100 million fine. 

This move will likely affect other centralized lending companies who might follow BlockFi’s lead to register so they can avoid SEC investigation and penalties.