What Is Crypto Lending for Passive Income?
Decentralized finance and cryptocurrency provide many ways to earn money for interested users. And for some of them, it is not necessary to make any effort – they simply provide their available coins for temporary use by others.
A bank deposit is a well-known way of earning money by placing fiat currency for temporary storage in a financial institution. The bank uses this money for its own needs and extracts profit from it. But it pays the client interest for this.
The processes in the cryptocurrency sphere are arranged similarly. That is, the lending of cryptocurrencies as a way of earning involves the transfer of coins for temporary use on the trading platform.
Let’s look at the question of what crypto lending for passive income is in more detail.
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What is crypto lending for passive income?
Cryptocurrency exchanges and many traders constantly have a need for borrowed funds in cryptocurrency. But they are ready to pay remuneration to the owners of capital for this. The process of crediting users and exchanges is called lending. The process is fully automated, and security is guaranteed by trading platforms. Therefore, lending is one of the safest ways to generate income.
The essence of the method is as simple as possible. The user borrows the cryptocurrency assets available to them for a specified time. Traders use them for margin trading on the internet platform.
But the peculiarity is that the exchange itself acts as an intermediary in this operation. That is, there is no direct interaction between the borrower and the lender. This simplifies operations and also provides a guarantee of security.
The interest for the use of credit funds is set by the platform. That is, there is no risk of losing funds due to the borrower making a loss. The balance of the latter acts as a guarantee of a refund. That is, if the operation makes a profit, the lender will get his money back anyway. This is guaranteed by the exchange.
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Why do people participate in crypto lending?
Lending is a rather risky type of transaction, which, surprisingly, many internet users go to. They are undoubtedly stimulated by potentially high earnings — in the end they will receive a reward in the form of an income of 250%. At least, this is exactly the forecast they make for all hunters for quick profits.
But it is worth noting that the lending is taken not by poor traders, but by those who already have capital. This applies to both the lender and the borrower of the currency. Therefore, any loss of capital does not affect their financial situation so much. On the contrary, any outcome of this action is that the money has finally started working.
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How can you make money on crypto lending?
To make money on the lending of cryptocurrencies, you need to go through several steps:
- Choosing a trading platform. Crypto lending is supported by exchanges and special platforms. At the same time, participation in lending for them is like an advertising campaign.
- Registration. On specialized lending platforms, traders may be asked to register, enter personal data, and upload scans of some documents. These are all types of verification in case someone wants to escape with easy money.
- Applying for participation. Following the rules of the platform, users place offers for the loan of their cryptocurrency or subscribes to existing projects.
After that, the trader can only wait until the applicants for favorable offers respond to his or someone else’s application. If all the money has been returned during the deposit period, the owner receives a percentage from this. And yes, each stage of the lending is controlled by the site.
Only a few cryptocurrencies support lending at the official level and guarantee its full support at all stages. Specifically these are:
- Ucoin cash
Each of the cryptocurrencies offers different conditions for lending. There may be deadlines for the payment of the entire amount claimed, as well as the percentage of overpayment for participation in the lending, etc.
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On which exchanges can lending take place?
There are even fewer cryptocurrency exchanges in the financial market that would officially support the lending. Because even here, the creators of the site need to deal with official documentation to get registration for such transactions.
The lending of cryptocurrencies on the exchange is available on such platforms as:
At these sites, the trader will be asked to undergo an equally serious identification procedure. You need to send everything via the internet, starting with personal data and ending with sending scanned documents.
Is it worth participating in the lending?
Lending exists both in the real and virtual world. The latter adopted it when they saw how people earn offline on it. But this way of earning money has its advantages and disadvantages.
The advantages are obvious:
- It is possible to achieve a very high passive income for the investor.
- Additional earnings are possible during the growth of the cryptocurrency rate.
- This is one of the ways to get a loan without contacting the bank.
- Lending is a kind of advertising for sites like exchanges and other cryptocurrencies, where this process is fully legalized and has documentary evidence. This attracts new customers to the site.
- Investments are attracted to projects, which cannot but please developers.
Lending on exchanges and cryptocurrency websites also has disadvantages. Firstly, it is a long-term investment with a high probability of risk. Secondly, it is a kind of freezing of the investor’s capital for a certain period. In addition, there is always a great risk of running into scammers.
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Lending is an interesting and easy way to earn money. It is very important to carefully study the site with lending services, evaluate the proposed tariffs, and only then start lending.