Best Lending Rates for Bitcoin
BTC Lending rates
Currently, there is no way to directly lend your BTC within a DeFi protocol. There are ways to do this indirectly, though, through the use of tokenized versions of Bitcoin which exist on Ethereum. By locking up your Bitcoin and being issued WBTC, you can indirectly lend your BTC (via WBTC) on Compound Finance. As DeFi systems continue to develop, we can expect many more mechanisms to lend and borrow Bitcoin, both on Ethereum and in second-layer Bitcoin solutions.
BTC DeFi platforms and dApps
WBTC was the first major tokenized version of Bitcoin to exist on the Ethereum Network. Each WBTC token is backed 1:1 with Bitcoin, which is held by a third-party custodian. The token gives users the opportunity to gain BTC exposure within platforms and dApps built on the Ethereum network, such as popular DeFi protocols. Ethereum DeFi users has welcomed the token with open arms, demonstrated as popular platform Compound Finance reached over USD$1m of WBTC market liquidity within its first month of offering the token. WBTC can be borrowed or lent via DeFi lending platforms, and will also give traders on Ethereum-based decentralized exchanges the ability to trade BTC pairs with their favorite altcoins and tokens. Currently, almost USD$6m worth of Bitcoin is locked up as WBTC reserves. Although this balance is in the hands of a trusted third-party, it is publicly verifiable on-chain.
TBTC is a more recent implementation of Bitcoin on the Ethereum network, and is very similar in nature to WBTC (You can read WBTC vs TBTC for differences). The key difference, however, is that TBTC does NOT rely on a third-party custodian to hold Bitcoin reserves. Instead, the TBTC protocol is a completely decentralized solution, which uses a sophisticated cross-chain system to trustlessly lock up Bitcoin and mint TBTC tokens. The system is still in its nascent phase and restricts users to strictly 1BTC deposits at a 6-month minimum timeframe, however, further development is expected to make this more flexible.
The Lightning Network is a second-layer solution built on top of Bitcoin, designed to help with scalability issues. Rather than facilitate lending and borrowing, Lightning is solely designed to facilitate faster payments with Bitcoin. On its own, the current Bitcoin protocol is only able to process 3-4 transactions per second. Lightning addresses this bottleneck by locking value in channels between users off-chain. Within these channels, users are able to perform transactions in a near-limitless capacity. A final net payment is settled on the main Bitcoin chain only once a channel is closed. This limits the number of transactions performed on-chain, and confines small payments to off-chain Lightning channels. About USD$6.3m worth of value is currently locked in a total of 30,600 Lightning Network channels (December 2019).
Best Non-DeFi Bitcoin Lending Platforms
Although it can be difficult to lend and borrow Bitcoin via DeFi solutions, there are also a number of non-DeFi platforms for this. Some of the most notable non-DeFi lending platforms for Bitcoin are:
Coinlist is primarily a platform where cryptocurrency projects can raise capital, but it is also building a lending marketplace. They’ve opened an early-access form, where you can propose an asset to lend, and a target rate.
Crypto.com is well-known for enabling people to buy everyday things, by using their crypto-enabled Visa cards. You can also earn interest on your Bitcoin with their “Crypto Earn” service, which accepts Bitcoin and multiple other cryptocurrencies.
Poloniex is a well-known exchange, which is now owned by Circle. It has its own lending markets, where users can loan their coins to margin traders. Unfortunately, this service is only available to those outside of the United States.
BlockFi is a relatively new crypto lending platform, which raised a whopping USD$18.3 million in their series A funding round in August 2019. You can lend your Bitcoin, Ether, or GUSD for up to 8.6% annually.
Best Bitcoin Exchanges
If you’re after some Bitcoin, chances are you’re going to be purchasing it with fiat currency. Coinbase has upheld an outstanding reputation since its launch in 2014, and is extremely well-known for seamlessly onboarding people into the cryptocurrency world. They have several fiat-to-crypto trading pairs, and provide users around the world with an easy way to buy crypto directly via credit or debit card.
BTC Trading volume: ~$85m (December 2019) Number of BTC Trading Pairs: 16
Gemini is a highly-compliant cryptocurrency exchange, which was created by the renowned Winklevoss twins. The exchange is headquartered in New York, and according to reports was the world’s first licensed Ether exchange. Gemini is also known for actively fighting price manipulation on their platform, as well as being trusted by prominent organizations – such as derivatives exchanges – for index prices. Like Coinbase, the exchange offers fiat-to-crypto trading pairs.
BTC Trading volume: ~$9m (December 2019) Number of BTC Trading Pairs: 5
Although not as established as Coinbase and Gemini in terms of fiat gateways, Binance is the world’s most popular exchange for crypto-to-crypto trading. It is quickly gaining ground as a fiat-enabled exchange, however the separation of Binance US into a smaller, exclusive exchange may affect the trading experience for customers in the United States. The global Binance platform offers the largest selection of cryptocurrencies compared to any other exchange, with almost 500 coins available to its users.
BTC Trading volume: ~$442m (December 2019)
Number of BTC Trading Pairs: 400+
Bitcoin DeFi FAQ
Although Bitcoin is the most widely-adopted cryptocurrency for basic payment purposes, it is not written in a Turing-complete scripting language.This means that smart-contracts and dApps cannot run directly on Bitcoin itself – rather, they need to operate on a second-layer which “plugs into” the Bitcoin blockchain. Ethereum, on the other hand, is both faster and Turing-complete, and directly supports this sort of infrastructure. This has led to most DeFi platforms being built on Ethereum instead, which has come with great success.
Currently, all major DeFi platforms exist on the Ethereum network, which means they are not directly interoperable with Bitcoin.Some of these, however, incorporate tokenized versions of Bitcoin. In order to use them, you will need to go through the appropriate processes to lock up and tokenize your own Bitcoins. Currently, the only large-scale implementation of this is Wrapped Bitcoin (WBTC). By using a lending protocol which supports WBTC, you can borrow a range of Ethereum-based tokens against WBTC collateral. If you want to “wrap” some of your own Bitcoin, check out this “Get WBTC” link, from the official WBTC Network website.
WBTC is a relatively new development, but it is already making steady progress in terms of platform integration and adoption.Compound Finance is one DeFi platform which has embraced WBTC, and already boasts over $1million worth of WBTC liquidity for borrowers using the protocol. WBTC also has a considerable range of partnerships, which will assist integration into further platforms including decentralized exchanges such as Kyber Network.