How does crypto lending work? Is crypto lending secure?

Dec 15,2022
How does crypto lending work? Is crypto lending secure?

Previously, Xiao Bian introduced crypto lending to everyone. According to crypto currency lending, customers can borrow crypto currency or borrow crypto currency for interest. Just provide the corresponding collateral to get the loan and start the investment. According to the decentralized finance (DeFi), DApp or cryptocurrency trading platform can borrow money. If the collateral is less than a certain value, users can recharge to the required value level to avoid forced position closing. After repaying the loan and expenses, the asset can be opened. So, how does crypto lending work? Is crypto lending secure? Next, let's have a look.

How does crypto lending work?

The crypto lending platform acts as an intermediary between the lender and the borrower. The lender deposits its cryptocurrency into the lending platform. The lender gets cryptocurrency loans based on the lending platform, which uses the cryptocurrency deposited by the lender to fund these loans.

The lender repays the loan with interest, and the borrower receives interest in cryptocurrency based on the amount they deposit. The lending platform sets the interest rate charged by the lender and the interest rate received by the lender. Rates vary by platform and cryptocurrency, and may involve each other's costs.

Whether according to the enterprise or decentralized lending agreement, the working mode of encrypted lending is the same. A key difference is that if you want to borrow according to the enterprise, you need to register an account first. Decentralized lending agreements generally do not need to be registered; You only need to connect your encrypted wallet to lend or borrow.

Is crypto lending secure?

At this point, many users may want to try or master more cryptocurrency lending methods, but before you are active in the crypto platform as a lender, please ensure that you are familiar with them and some details. There will be a change in the customer's identity in the process of cryptocurrency lending and borrowing. Here is an important stage to note. When a customer transfers cryptocurrency to any lending platform, the platform will have the cryptocurrency key, not the customer! If you only have bonds issued by smart contracts, please carefully check the audit standards, projects and team history of smart contracts to help you make wise decisions. Is there any difference?

Of course, if a user neglects the above precautions and blindly lends out encrypted assets, do not be surprised to suddenly find that his encrypted currency or encrypted assets have disappeared one day. Netflix has a documentary film in 2022, TRUSTNOONE:.

One mistake may cause great losses. Therefore, before deciding to apply the lending platform, please conduct research as perfect as possible. No matter what lending platform you apply, it is important to master the rules and limitations.

Precautions for encrypted lending

By using a trusted lending platform and selecting stable property as collateral, you can successfully obtain cryptocurrency loans. Before making a hasty decision to borrow, consider the following:

1. Master the risk of transferring the custody right of personal cryptocurrency. Once money leaves your personal wallet, you must trust others or smart contracts to handle it. These projects may become targets of hackers and frauds. Under some conditions, personal currency may not be available immediately.

2. Before lending cryptocurrency, carefully consider the current market situation. The currency needs to be locked for a period of time, so we can not respond to the downturn of the cryptocurrency market in a timely manner. Borrowing based on the new platform is also risky. It is better to wait for the platform to establish sufficient recognition before taking action.

3. Read the terms and conditions of the loan. There are many ways to obtain loans. Customers should choose better interest rates and more favorable terms and conditions.

Speaking of this, I believe that we have a certain understanding of how encryption lending works and whether encryption lending is secure. In general, I also remind investors that they must understand the standards before deciding to conduct encrypted lending and ensure that trusted platforms are used first. Blockchain applications enable customers interested in credit supply and demand to enjoy unprecedented convenience, while cryptocurrency borrowing has become a powerful tool for them.