Cryptocurrency Lending Interest Rates for April 2020

 
2.22% 2.37% 1.18% 17.67% 2.59% 2.4%
0.44% 0.62% 0.82% 2.31% 1.81% 1% 8.6% 5.37% 1.25%
0.01% 0.33% 1.62% 2.26% 0.03% 1.2% 4.12% 4.5% 0.07%
1.4% 11.29% 6% 0.91% 6%
0.08% 0.99% 3.13% 0.04% 2.4%
2.86% 4.41% 6.87% 2.66%
10.55% 0.01% 1.2%
0.04% 2.25% 0.01% 1.36% 4.41%
0.05% 2.5% 0% 1.4%
0.18% 1.61% 0.11% 1%
3.4%
2.6%
0.1%
1.2% 0.04% 0.04%
1.6% 2.84% 0.33%
2.4%
1% 8.6%
0.92% 0.02%
0.74% 0%
1.2% 0.34% 3.8% 0.15%
4.1%
1% 8.6%
15.59% 19.46%
0.25%
4.3% 0.71% 2.4%
0.06% 2.74% 2.8% 9.82%
1.4% 8.28% 0.04%
3.2% 4.07% 5.6%
1.4% 2.29%
 
6.21% 8.61% 1.81% 16.98% 2.64% 2.4% 3.7%
1.4% 1.84% 0.82% 8.93% 2.09% 1.44% 8.6% 9.56% 1.25%
0.01% 0.12% 1.99% 1.68% 0.02% 1.29% 8.86% 3.65% 0.1%
1.49% 13.45% 5.15% 1.77% 6%
0.06% 1.01% 2.03% 0.04% 2.02%
4.27% 6.72% 9.63%
7.16% 0.23% 1.2%
0.14% 3.88% 0.01% 1.36% 3.44%
0.04% 2.44% 0% 1.4%
0.16% 0.9% 0.11% 1%
3.4%
2.6%
0.22%
1.2% 0.04% 0.04%
1.6% 5.73% 1.32%
2.4%
1.44% 8.6%
0.82% 0.03%
0.83% 0%
1.2% 0.5% 3.8% 0.08%
4.32%
1.57% 8.6%
12.13% 8.68%
0.43%
3.34% 0.71% 2.4%
0.06% 2.68% 2.8% 9.72%
1.4% 6.13% 0.19%
3.45% 4.45% 5.6%
1.4% 2.47%

Decentralized Finance lending – or DeFi lending for short – allows users to supply cryptocurrencies in exchange for an annualized return.

A New Way To Lend

DeFi lending is a revolutionary new way to loan and borrow capital, namely due to the removal of third parties and written contracts.

Rather than relying on paperwork or a middle-man to facilitate the creation of loans, DeFi lending leverages automated systems – called smart-contracts – to issue loans using blockchain technology.

Smart-contracts use a series of pre-established rules to trustlessly arrange loans, calculate and transfer interest payments, and, if necessary, liquidate collateral.

For cryptocurrency holders, DeFi lending presents a smart and safe way to secure leverage, or simply collect interest on otherwise-idle digital asset holdings.

Top DeFi Lending platforms

Compound Finance

Compound Finance is a permissionless lending platform built on Ethereum. The protocol uses smart contracts and native assets called cTokens to track ownership and interest across different lending pools. The platform offers it’s highest returns on Ethereum-based stablecoins like DAI and USDC.

Compound Finance also supports lending markets for other tokens such as ETH, ZRX, BAT, and wBTC.

The platform has floating interest rates, which are continually recalculated according to supply and demand, with interest being calculated every block.

Lending periods are extremely flexible, with users able to withdraw their funds at any given time. There is no minimum limit on how long you lend your coins.

Read our Compound Finance Review

Aave

Aave is a permissionless lending protocol offering unique features such as flash loans and flexible interest rates.

The platform uses record-keeping tokens – aTokens – which allow users to track interest earned in real-time.

Formerly known as ETHLend, the protocol leverages a native token – LEND – which is used for governance and trading discounts, along with being burned using fees.

Read our Aave Review

dYdX.exchange

dYdX.exchange offers a decentralized exchange (DEX) as well as typical lending and borrowing functionality.

On dYdX, funds can be directly borrowed via the trading interface and used for margin trading.

The platform is built on Ethereum, and specializes in lending DAI, USDC, and ETH. As such, the market pairs are currently limited to ETH-DAI, ETH-USDC, and DAI-USDC.

Interest rates on dYdX are floating, and like Compound Finance, are adjusted regularly based on supply and demand.

Capital can be withdrawn at any time, and each loan is capped at a maximum period of 28 days.

Perhaps the most novel aspect of lending on dYdX is that capital supplied to the exchange collects interest even while a trading position is open.

Read our DyDx Review

Dharma

Dharma offers annualized interest on popular stablecoins like Dai and USDC, specifically geared for a nontechnical audience.

Users can connect to Dharma through web 3 wallets like MetaMask or by linking their Coinbase account.

Dharma is geared at new users, and currently supports a limited number of assets. They recently introduced dTokens – or native interest-earning assets which siphon a portion of interest to Dharma as a revenue stream.

Dharma leverages Compound’s smart contracts to offer an intuitive interest-earning solution.

Read our Dharma Review

DeFi Crypto Lending Platforms [2020]

  • Compound Finance
  • DyDX
  • Fulcrum
  • Nuo
  • Aave

Centralized Crypto Lending Platforms [2020]

  • Bitfinex
  • BlockFi
  • Poloniex
  • Coinbase
  • Crypto.com

Lending Growth

The amount of capital supplied to different lending protocols has grown substantially in the past year. Using Total Value Locked (TVL) as a leading indicator helps visualize the amount of capital being supply across most major lending protocols at any given time.

An overview of how lending protocols grew in 2019 can be found in our annual report.

We’re now beginning to see a surge of new lending alternatives emerge, all offering competitive rates and services to try and attract capital to their platforms. An active list of the most popular lending platforms can be found here.

DeFi Lending vs Traditional Money Markets

Although they are similar concepts, DeFi lending varies from traditional money markets in a number of ways.

Currency

First and foremost, DeFi lending currently revolves around cryptocurrency lending only.

Whereas traditional money markets consist of fiat currency, DeFi lending systems require the use of currencies which are able to interact with smart-contracts.

Since Ethereum is the most widely-used smart-contract platform, most DeFi lending systems solely support ERC20 tokens – unique Ethereum-based assets.

Stablecoins such as DAI and USDC are popular on DeFi lending platforms as they provide the potential for smart-contract interactions while holding a stable value (most are pegged to the US dollar).

Collateralization

In traditional lending, loans are often only partially-collateralized, collateralized with physical goods, or rely purely on legally-binding contracts. State legal systems are used to resolve disputes and liquidations.

DeFi lending, on the other hand, exists solely in the realm of the internet.

By design, it does not involve third parties or legal systems. Physical goods or paper-contracts are incompatible with DeFi protocols, which means that loans are often collateralized by other cryptocurrencies.

In order to erase the risk of default and ensure repayment, the vast majority of DeFi loans are over-collateralized with cryptocurrency, commonly at a rate of 150%.

Put simply, in the majority of lending cases today, the borrower must lock-up assets with a higher value than the amount that they are borrowing.

Accessibility

One can only participate in traditional money markets if they meet the criteria of local regulations and institutions.

This limits participation via a number of restrictions such as laws, capital requirements, lack of infrastructure, and more.

Individuals are also usually limited to operating only with people of their own geographical region.

DeFi lending, however, enables the participation of almost anyone with an internet connection.

Usage is not restricted by wealth, identity, or location.

Counterparty Risk

Traditional peer-to-peer lending often carries a relatively high risk of default, and disputes can be time and money intensive.

DeFi loans are secure, thanks to over-collateralization and automated liquidation.

Infrastructure Risk

Any lending protocol is only as good as the infrastructure that it is built on.

This infrastructure is very different between traditional and DeFi systems. If a DeFi smart contract contains any vulnerabilities, any currency stored within the contract may be at risk.

Most DeFi lending platforms have had their smart contracts rigorously audited prior to exchanging any value while insurance products like Nexus Mutual provide the opportunity to purchase covers on various lending contracts.

Ease-of-use & Fraud

Banks and other financial institutions bring a valuable layer of trust and protection into money markets, which users are charged for in the form of fees.

Traditional money markets have their limitations, however, and at times one may wonder if these fees are justified.

Excessive paperwork, slow transactions and processing, and other shortcomings in traditional systems are all characteristics that traditional systems suffer from.

Smart-contracts in DeFi lending remove the need for these third parties. This eliminates paperwork and administration costs, and significantly speeds up processing times.

Cryptocurrency networks also enable users to transact at any hour of the day, any day of the week – something that is near-impossible with traditional money markets.

Getting Started

All you need to start lending on DeFi protocols is an Ethereum wallet like MetaMask and a supported currency like Ether or Dai!

Lending With Compound

1. Visit the compound.finance website, and click the “app” button. Alternatively, click here to go straight to the compound finance app interface.

You will be prompted to connect to the compound protocol, via a popup which looks like this:

 

You will be greeted with a similar window for each step that requires interaction with the Ethereum network. Each of these steps involves a very small fee, to power these network requests.

2. Once you are connected to the app via Metamask, you will have to “unlock” each asset you wish to lend.

 

3. You should see a transaction pop up via your wallet (like MetaMask) – if this does not happen within 30-60 seconds, refresh the page.
Once unlocked, you can select whichever token you wish to lend clicking “Supply”.

For this example, we’re going to lend some Ether (ETH).

4. Click the green “Supply” button.

5. A pop-up window will appear, like the one above.

Select the amount you wish to supply for lending, then click “supply”, at the bottom of the window.

Again, confirm the contract interaction in the Metamask pop-up.

Once confirmed, your balance will be updated on Compound. This means that your tokens (in this case ETH) is removed from your MetaMask wallet in place of cETH (Compound’s interest-earning version of Ether). You will collect interest for as long as you hold cETH in your wallet.

Please note that interest is not paid out, rather the value of you cETH grows over time. When redeeming your cETH, you will be returned your original collateral plus any interest that was accrued over time.

The tokens supplied also act as collateral for borrowing. You can view how much borrowing power you have in the box in the top right of the window.

All you have to do now, is let it sit and watch the interest add up with each block!

To withdraw your Compound Finance balance

You may withdraw your balance at any time, as well as any interest earned.

This is just as easy as supplying money to the protocol.

1. To withdraw your lent money, click the grey “Withdraw” button, as seen above.

2.You will see another pop-up window, asking how much you want to withdraw.

Enter the amount to wish to withdraw from your account, and click “Withdraw” at the bottom of the pop-up window.

Confirm the contract interaction in the Metamask pop-up.

And there you have it! Money-back in your wallet, plus interest!

Popular Cryptocurrencies Used in DeFi Lending

Dai – A decentralized, Ethereum-based stablecoin

Dai is the leading DeFi stablecoin due to the notion that it is NOT collateralized with fiat currency, which makes it very unique amongst its peers.

Rather than simply being backed 1:1 by US dollars, the value of the Dai token is stabilized via a smart contract with multiple mechanisms. These include over-collateralization in ETH, stakeholder incentives, and other automatic feedback mechanisms.

Dai is issued by Maker and has managed to hold its peg within a few cents of $1 for 99.9% of the time since it was created – even despite the price of Ether dropping 90% from all-time highs.

USDC – A fiat-collateralized stable coin by Circle & Coinbase

USDC is backed 1:1 with fiat currency and exists as a token on the Ethereum network so that it can interact with smart contracts.

USDC is one of the fastest-growing stablecoins and has excelled in widespread adoption. It has grown to a market cap of almost half a billion dollars since its inception in October 2018.

This is largely thanks to its reputable owners in Circle and Coinbase, and the coin’s integration into their infrastructure.

Ether (ETH) – The native token of the Ethereum Network

Ethereum is a blockchain platform which enables the use of smart-contracts – a form of automated agreement or system – and has been around since 2015.

Ether is the “fuel” that powers the platform and is used as payment for interacting with smart-contracts.

All of the above lending platforms are built on the Ethereum protocol.

Looking Forward

DeFi lending is a relatively new concept, but the infrastructure is already live, easy-to-use, and thriving!

Decentralization and smart contracts have given DeFi lending the power to be quicker, more efficient, and more accessible than traditional lending methods.

Whether you want to coordinate a leveraged strategy, or simply earn interest on cryptocurrency that you have lying around, protocols like Compound Finance, Dharma, or dYdX Exchange are here to help.