Currently the trend of Bitcoin development is not only to reap profits from buying and selling digital assets, but there are also Bitcoin lending services and other cryptocurrency assets that are used as collateral to obtain funds in the form of stablecoins such as USDT, DAI, etc.
Cryptocurrency loans that are now present are widely used by investors to simply get loan funds or provide loans to blockchain projects that are being worked on. The advantage of lending Bitcoin to the DeFi lending platform is the percentage you get from the interest on the loan that reaches more than 4% per year.
For borrowers who provide cryptocurrency guarantees such as Bitcoin (BTC), Ethereum (ETH), and so on, you can apply for a loan quickly and easily on the DeFi lending platform. Of course, with a minimum nominal loan application in accordance with the provisions of each platform.
This cryptocurrency loan has advantages in terms of submission, which is only enough to have digital assets, while the process does not need to go through a bank check to find out the credit score.
Bank Vs Cryptocurrency Loans
The process of applying for a cryptocurrency loan on the DeFi lending platform is like you are applying for a credit loan through fintech services, P2P lending or borrowing (online loans). You only need to agree to the various terms and conditions that apply.
When you apply for a loan at the bank, you may have a lot of problems with administrative requirements that are quite difficult. Of course, not everyone can access loan services at the bank, but only certain people can apply for a loan. However, loans on the DeFi lending platform are not like that, you only need to download or use a cryptocurrency loan application, and register yourself and then select your needs to borrow or lend on the platform.
The borrowing process on the DeFi lending platform only takes one minute, this process is much faster than via a bank which can take days.
Another advantage when you make a cryptocurrency loan is that you can use the obtained stablecoins to buy other cryptocurrency assets through cryptocurrency exchanges that serve crypto-crypto trading. Then, you can use the profits from these digital assets to pay for your credit.
However, borrowers must also be careful if the cryptocurrency assets that are used as collateral for repayment experience a decrease in price which makes the value of the collateral when disbursed also decreases.
In addition, borrowers can also provide collateral in the form of fiat currency to obtain Bitcoin loans and other digital assets. The advantage of providing a guarantee in the form of fiat currency is that you can benefit from Bitcoin that is owned by an increase in the price in the market.
DeFi Lending Platform A Blessing for Givers and Borrowers
The main task of investors is to find as many investment opportunities as possible. So, the profits you get from an investment instrument can be reinvested into other types of investment instruments.
One way to make money work for you is to use your idle funds to invest in investment instruments that offer tantalizing returns.
The presence of DeFi is now good news for all cryptocurrency asset owners around the world to further maximize the money that can be obtained through financing on the DeFi lending platform.
As the owner of Bitcoin et al, you can put your funds in the DeFi project that is being worked on to get a return on the loan you have provided. You can analogize this as placing your funds in a bank deposit for a certain period of time with a fairly large rate of return.
In the midst of the pandemic, the deposit interest offered in Indonesia is only around 4% per year due to Bank Indonesia's policy to reduce deposit interest rates. However, if you put your digital assets in various DeFi projects, you can potentially earn up to 8% annual returns.
What about the borrower? Borrowers can use borrowed funds in the form of stablecoins and cryptocurrencies obtained to buy collateralized digital assets such as Bitcoin (BTC) and Ethereum (ETH), this method is very effective when prices are bullish. So, the increase in the price of Bitcoin (BTC) and Ethereum (ETH) which has become a guarantee can cover the interest on the loan that you need to pay.
The Bitcoin lending mechanism is different from other loans in general, because the fiat currency or digital asset that is used as collateral has a higher value than the amount of the loan you can get. If during the borrower period
it is safe at any time the guarantee provided has decreased in price below the loan you received, then the guaranteed digital asset will be subject to liquidation and the loan will close after the user is charged with interest and fines. So, Bitcoin loans with this guarantee are secured loans, as you usually find when applying for mortgages and KKB.
For that, before applying for a Bitcoin loan on the DeFi lending platform, you need to first understand the current market conditions, if you are in a bearish trend you should pledge your stablecoin and get a volatile cryptocurrency loan.
Meanwhile, during a bullish trend, you are better off pledging a volatile digital asset and obtaining a stablecoin loan. This strategy is widely applied by investors as a 2020 cryptocurrency investment trend
