In the recent global pandemic, the cryptocurrency industry has greatly flourished, bringing in millions of investors from all over the world. The current (October 2021) market cap of the entire cryptocurrency industry is $2.6 trillion. With such an increasing trend, investors are looking for various options to grow their wealth. Crypto lending is one of the hottest topics in the crypto investment sector because of its vast potential for returns.
To generate passive income you can use cloud mining, dividend-earning tokens, yield farming and lending. For lending crypto, a lending platform connects the borrowers and lenders. Users mainly have a choice between automated and manual crypto lending platforms. One may find it challenging to choose between them. Through this article, let’s find out what automated and manual platforms are and how to choose between them.
9 Easy Ways to Choose Automated or Manual Crypto Lending
What is crypto lending?
To generate passive income you can use cloud mining, dividend-earning tokens, yield farming and lending. Lending crypto allows cryptocurrency holders to lend their digital assets in return for interest payment. Investors can choose between dozens of popular cryptos and stable coins, including Bitcoin, Ethereum, Tether, etc.
Crypto lending for investors
Investors or lenders deposit their digital assets into wallets on a crypto lending platform and receive interest rates. It can be weekly or monthly, depending upon the agreed terms at the time of loan approval. The interest rate depends on the lending platform, but it can usually be 3%-7% for Bitcoin and up to 17% for stable coins.
Crypto lending for borrowers
Crypto lending allows borrowers to borrow physical currency to avoid the selling of cryptos. Borrowers have to deposit collateral in the form of crypto or fiat currency to get a loan. The value of the collateral must be more than the value of the loan. It serves as a security for the lender’s investor.
Once the borrower pays back the loan and the incurred interest, he receives his collateral back.
Types of crypto lending platform
Lenders and borrowers are connected through an exchange such as Binance, Coinbase, etc. These platforms act as an intermediary, taking care of transactions between lender and borrower.
There are two types of lending platforms:
- Automated lending platform
- Manual lending platform
What is an automated crypto lending platform?
An automated lending platform starts generating dividends for you as soon as you deposit your assets on their platform. It handles everything on its own, providing a hassle-free experience to users.
Example of the automated lending platform- Celsius Network
Celsius Network enables a fully automated lending process. To start with the process, you need to transfer your assets to the platform’s wallet, and you will automatically start earning dividends on your assets based on the coins you deposited.
What is a manual lending platform?
On a manual lending platform, you will have to manually stake your cryptos for a certain period to generate dividends. You will have to manage everything, such as setting up requirements, including interest rate, LTV, loan duration, etc. It involves negotiation between lenders and borrowers.
Example of manual lending platform-CoinLoan
CoinLoan is a manual lending platform that provides a marketplace where a borrower can set the requirements for a loan and then post them. Investors check the “Loan Request” to check the available investment options. If the investor likes the financing request, he can invest in it. He will then start earning dividends on the rate and duration mentioned in the request.
This is the generalized concept for the manual and automated platform, but it may vary depending on your chosen platform.
How to choose between manual and automated lending platforms?
Now, you understand how both lending platforms work. To decide which one to choose, you will have to consider the features of one over the other.
For example, if you are an investor and want to earn dividends, it is hard for you to manage things on your own, or you are not sure which loan request you should select. Then, automated lending platforms are the best option for you. By choosing this platform, you will be earning returns on your assets effortlessly.
On the other hand, if you have a good understanding of the crypto market, are experienced, and can manage your time, choosing a manual lending platform won’t be a challenge.
For borrowers, a manual lending platform can be the best option. Because on these platforms, they can set terms and conditions according to their convenience. Also, they know better what exactly they want.
Conclusion
Crypto lending is not that much complex as you think. You have to be clear about things that you are looking for. Always do your research before choosing any crypto for lending or any lending platform. The best method is to compare different platforms and then choose one out of them. Following the tips of experts, you can maximize your returns.
The cryptocurrency market has a bright future, so does crypto lending. So, do not hesitate to adopt crypto lending.
