Crypto lending is a concept where one party will give their digital asset to another in exchange for interest. This is similar to the format of traditional lending, but here it does not include any banking services rather it includes crypto lending platforms. Lending Litecoin helps to get interest back to the lender. It is a great way to support yourself by getting a more secure passive income. The lent coin will start giving a return once it is placed on the platform. With higher interest rates it is always a better choice to get side income without doing much of a work. In this article, we will be looking at the step-by-step guide for lending Litecoin, risks in crypto lending, and different platforms that allow for lending. We will also look at lending being a good practice.
Concept Of Crypto Lending
Crypto lending refers to earning interest rates from cryptocurrency which does not have to face market fluctuations. It gives the option of passive earning through interest by lending out the crypto through different platforms. It is done by not keeping the crypto asset in the wallets but lending them to the needed people who will give interest in exchange. Cryptos are lent to a platform that will give back the interest rates. This platform consists of both centralized and decentralized systems which give different types of benefits and risks. These decentralized lending platforms work on blockchain technology and use smart contracts for the transaction process. Because of this, it works without the interference of a central authority.
The centralized mode is the traditional system of banking. They become the middleman between the borrower and lender which makes itself a platform for lending cryptocurrency. These usually have a high compensation rate and also the borrower needs to submit any type of collateral in order to get any cryptocurrency loan.
Steps For Lending Litecoin
- Acquire Litecoin (LTC) Tokens: The very first step is to have Litecoin in your hand. If not, you must buy it first. There are several exchanges, such as Nexo, PrimeXBT, Uphold, OKX, and YouHodler.
- Selecting A Lender: After you buy Litecoin, you need to find the perfect lender. It is very important to choose a Litecoin lending platform.
- Lending The coin: Once it is finalized which lending platform you want, then you need to transfer the coin to your wallet on the platform
- Getting Interest: This is the best part where you do not have to do anything, just need to wait and relax while the coin starts earning interest. The more you deposit, the more you will be getting interest.
Advantages And Disadvantages
Cryptocurrencies are considered to be a significant asset in the world. Like most of the assets, cryptos can also be lent, borrowed, and used as loan collateral. It also comes with certain risk elements which we will be looking at next.
- Absence Of Legal Clarity: While lending has been happening for a long time, crypto lending is still in its beginning. Because of this, there is still a lack of regulatory framework which will cause some confusion to both lenders and borrowers.
- Failure Risk: This is a common risk in most of the financing sector which is losing all the funds. In crypto, if the platform goes bankrupt then there is a chance of losing all the funds fully or partially.
- Hidden Fees: Some platforms will possess hidden fee structures which results in the risk of not being transparent about the fees.
- Security Issues: The most infamous risk of all is the chance of hacking and cybercrimes. If these platforms had been attacked and all the funds had been lost then there is no guarantee of returning the funds.
- Volatility: As cryptocurrencies are volatile, their values can be changed and their price will drop at the time you are lending.
By keeping all those risks in mind there are also a lot of benefits for crypto lending.
- Passive Income: Lending the cryptocurrency will give you an interest amount without losing your asset.
- Best Interest Rates: Compared to the traditional savings account, the interest rate is much higher for crypto lending.
- Flexibility: Crypto lending gives better flexibility when it comes to different terms, repayment schemes, etc.
- Limited Gatekeeping: Crypto lending does not force too many criteria for crypto lending.
- Privacy: Privacy will be never compromised when compared to traditional finance. Too much personal information is not needed. It only needs the user’s collateral.
Different Platforms That Allow Litecoin Lending
Different platforms allow to lend Litecoin. Choosing the best platform is very important for the coin holders to gain maximum interest in their digital currency. These platforms are one of the best ways to increase the value of the user’s cryptocurrency. Some of the famous platforms are mentioned below:
- Nexo: A blockchain-based lending platform that allows instant loans to its users. The platform is supported by Nexo TOKEN based on Ethereum.
- Nebeus: An alternative for Web3 which connects traditional banking and cryptocurrencies altogether in one application. It allows its users to use Nebeus like any other bank with a direct connection with Web3.
- Blockchain.com: Provides crypto lending, borrowing, and trading. The platform acts as a blockchain explorer which allows users to understand and see public cryptocurrency transactions.
- Gemini: With the benefits of security and ease of use, Gemini becomes a cryptocurrency platform constituted with a website and mobile application for all the buying, selling, and spending of cryptocurrencies. It supports more than 150 cryptocurrencies for trading and also possesses its currency which is known as Gemini stablecoin.
Is Litecoin Lending Good?
Crypto lending gives the users a passive income and if that interest is again reinvested the users can achieve compound returns and enhance the overall yield over time. It offers so much flexibility and many advantages also. In the case of Litecoin, lending helps to improve Litecoin holdings and offers quick financial exchangeability by not losing all the assets. No matter if you are targeting a passive income from Litecoin, or clearing out of the crypto-backed loan, this lending process will give much superiority. But still, it is very much recommended to research and stay informed about the lending space and all the platforms. There are risks involved in any financial process no matter what. So detailed understanding is always recommended.
