Ether Cryptocurrency Lending Rates
Ethereum is a decentralized smart-contract platform which was developed in late 2013 by renowned founders including Vitalik Buterin, Gavin Wood and Joseph Lubin, among others.
Ethereum went live following an Initial Coin Offering (ICO) for the protocols native token – Ether ($ETH) – in mid-2015.
The platform runs self-executing code, enabling the creation of decentralized applications on the platform. Transactions and computations are fueled by “gas” which is denominated in Ether.
Ethereum is home to the vast majority of popular decentralized applications (dApps) today, including major decentralized finance (DeFi) products such as Maker, Compound Finance, Synthetix, Set Protocol Unis
Ethereum DeFi Lending Platforms & Dapps
As the industry-leading DeFi protocol, the Maker protocol is responsible for the issuance of Dai – the world’s first decentralized stablecoin.
For Dai to be created, users over-collateralize loans with collateral like Ether. As a stablecoin, Dai is a natural hedge against the usual volatility of the rest of the crypto market.
Similarly, Dai can be used to purchase other cryptocurrencies, providing an opportunity for additional exposure to the wider crypto market if you expect prices to rise.
Compound Finance has established itself as a leading lending protocol within DeFi.
Each token comes with its own floating rate for loans, which is updated continuously.
By locking up collateral such as Ether, users can borrow and trade with leverage. As with the most other DeFi lending platforms, loans must be over-collateralized with the secured asset.
Best ETH Exchanges
Binance is one of the world’s most popular and well-established cryptocurrency exchanges. It is an excellent place to trading Ether, providing access to over 130+ ETH trading pairs. This makes it extremely easy to purchase and sell virtually any popular token using Ether.
Binance also offers a US-only exchange which is more limited in its coin selection, largely offering USD-based trading pairs.
Coinbase is well-known as the go-to exchange for first-time crypto buyers and has been going strong since it’s creation in 2014.
Coinbase offer a narrower selection of cryptocurrencies than many other exchanges, but make up for this with their excellent reputation and onboarding experience.
Coinbase also does an excellent job of streamlining the crypto-purchasing process, enabling users to buy cryptos including Ether with their credit card – all in a user-friendly way.
Why is ETH great for DeFi?
Ether is the gas which powers all of the DeFi platforms we know and love. Without Ether, these platforms simply wouldn’t be possible!
A great article on how Ether can be viewed as the economic bandwidth for DeFi by one of our writers, Lucas Campbell, can be found here.
Aside from this, Ether is the most widely-accepted cryptocurrency as collateral in securing DeFi loans – something which doesn’t look like it will change anytime soon. Ether is the second-largest cryptocurrency in the world, and will likely stick around for a long time.
Despite its volatility, Ether is slightly more stable than many other altcoins with extremely high trading volume compared to the rest of the cryptocurrency market. This makes it more liquid, accessible, and reliable for use in dApps and lending platforms.
Only stablecoins (most of which are backed or powered by Ether), are more stable in value and have comparable liquidity.
One of the best things about using Ether as collateral is that you get to retain exposure to the upside while taking out your loan. If you use your borrowed Dai to purchase more Ether, you can effectively take a leveraged long position – all without using a margin-trading exchange!
ETH Lending FAQ
You can mimic a leveraged long on crypto assets by taking out a loan against your Ether in the form of more Ether, or another cryptocurrency.
By doing this, you retain the exposure to the value of your collateral, as well as obtaining further exposure to the coins which you are borrowing. By borrowing more Ether, you are effectively taking a leveraged long position on Ether.
You can achieve the same effect by borrowing a stablecoin against your Ether collateral, and using these stablecoins to purchase more Ether on an exchange.
Since Ether is so widely accepted amongst DeFi platforms, you can use it as collateral almost anywhere! All major DeFi platforms such as MakerDAO, Compound Finance, dYdX, Dharma, Nuo Network, and more will accept your Ether as collateral for taking out a loan.
Bear in mind that over-collateralization is the norm, and you will be required to secure your loan with around 150% of the loan value with your Ether.
The value of your collateral is an important thing to consider when taking out any DeFi loan. This is especially important when securing a loan against any asset that is not a stablecoin.
Most DeFi platforms will automatically liquidate your debt position if its value drops below a certain threshold in dollar value. If you see the value of your collateral falling, most platforms will allow you to lock up more collateral to save your position.
Check with your DeFi platform provider for their specific terms and conditions surrounding liquidating collateralized debt positions.
Alejandro is a New Zealand-based trader and writer who has been involved in the cryptocurrency and blockchain space since early 2016. Being extremely passionate about this emerging technology, he has written content for a myriad of projects and news outlets.