Crypto Lending Interest Rates for May 2022
Crypto lending rates are updated every hour.
Decentralized Finance lending – or DeFi lending for short – allows users to supply cryptocurrencies in exchange for earning an annualized return.
Welcome to the DeFi Rate lending page – your guide to real-time interest rates across all the most popular platforms in DeFi.
Latest Lending News
DeFi lending has found its status quo. Industry leaders like Aave and Compound have solidified themselves as the top choice for users to lend and borrow popular DeFi tokens. Maker, the creator behind Dai, has now issued over $3B worth of stablecoins, all on the back of trustless lending using smart contracts.
Across the board, stablecoins have turned into even more useful assets as projects look to incentivize early liquidity by providing lenders with governance tokens. Going one step deeper, automated yield aggregators are now leveraging lending opportunities to allow traders to deposit stablecoins and earn the best available rates thanks to automated strategies. The best example of this is Yearn, allowing users to deposit a token of their choosing to a ‘Vault’ that puts underlying capital to work using leading lending strategies.
But, for the risk averse lender, rest assured that DeFi APYs are continuing to perform at multiples above a traditional savings account, best highlighted by the rates shown on our lending chart.
An Overview of Crypto Lending
Lending markets are an important part of any currency market. The ability to temporarily acquire or offload funds – without an outright sale – has many useful applications.
This is especially true in the world of crypto, which opens up vast opportunities for creating lending markets in new and exciting ways. At the heart of this lies the concept of smart contracts: self-executing code that enables lending agreements to be carried out in an automated fashion, with no middleman. This has come to be known as decentralized finance, or “DeFi”.
Centralized crypto lending markets also exist, often referred to as “CeFi”. These platforms have their own set of advantages, including the ability to support different blockchains and provide features with fiat currencies.
Thanks to crypto lending markets, long-term holders can earn a rate of return on their assets, while providing borrowers with an opportunity to perform financial strategies.
Below we’ll provide an overview of DeFi and CeFi crypto lending markets, as well as some of the top platforms in the space.
How does crypto lending work? Is it safe?
Crypto lending typically works by depositing an asset into a centralized service or a smart contract, in exchange for a certain rate of return. These funds are then lent to borrowers at a rate of return which covers the interest payments made to lenders.
In most cases, borrowers must deposit an amount of collateral which is greater in value than the funds they borrow – a practice known as over-collateralization. This ensures that the value of the borrowed funds can always be returned, in the case of default or market volatility.
Crypto lending is only as safe as the protocol or company itself. Although returns may appear safe and guaranteed, there are plenty of risks to be considered – from smart contract risks, to management risks and more.
What is the difference between DeFi vs CeFi Lending?
DeFi lending is a process entirely automated by smart contracts – no single individual or entity is in control of the custody or exchange of funds. With DeFi, you are essentially trusting computer code to appropriately manage your money.
On the other hand, we have CeFi lending. CeFi lending is carried out in a similar way to the traditional financial world. A centralized company manages the custody and exchange of your funds, typically taking a fee for their services. With CeFi, you are trusting a company to appropriately manage your money, rather than computer code.
Each of these methods have their own pros and cons, as well as a different assortment of risks.
Top 4 CeFi Lending Platforms
Celsius is also a centralized platform that focuses on fiat currency loans borrowed against crypto holdings. Like BlockFi, Celsius also enables users to deposit supported cryptocurrencies and earn a return on them.
Celsius started via an initial coin offering (ICO) in 2018, raising $50 million through the sale of its native CEL token. The company eventually rose to manage billions of dollars for its users. Again, users can only borrow US dollars or stablecoins.
- UK based company
- Pays interest on crypto deposits
- Borrow USD or stablecoins against crypto deposits
- Get better interest rates when using native CEL token.
Nexo is another CeFi platform that has been around since 2018, which also manages billions of dollars in customer funds. It allows users to earn interest on deposits of a range of cryptocurrencies from different blockchains, as well as borrow USD and stablecoins.
Nexo also offers a crypto credit card that enables them to spend their crypto balances anywhere that mastercard is accepted.
- UK based company
- Earn interest on crypto deposits
- Borrow USD or stablecoins against crypto deposits
- Offers crypto credit card.
Gemini is a regulation-friendly cryptocurrency exchange run by the famous Winklevoss brothers, who were involved in the early days of Facebook. The exchange also provides a lending product, Gemini Earn, which enables users to earn interest on their crypto holdings.
Unlike the other platforms above, Gemini Earn lends these funds exclusively to accredited institutional borrowers. Regular users cannot borrow against their crypto holdings using Gemini. One feature to note is that Gemini Earn serves customers in the state of New York – something that very few other lending platforms do.
- US-based cryptocurrency exchange platform
- Earn interest on crypto holdings
- No loan feature yet
- Serves the state of New York.
BlockFi is a US-based crypto financial services company, which was founded in 2017. It is a centralized firm that offers interest-bearing crypto savings accounts, as well as fiat currency loans backed by cryptocurrency collateral.
Although users can earn interest on a wide variety of cryptocurrency deposits, they can only borrow USD or stablecoins against their crypto holdings.
- US-based company
- Interest-bearing crypto savings accounts
- Borrow USD or stablecoins against crypto deposits
- Exchange services.
Top 3 DeFi Lending Protocols
Aave is currently the largest multi-asset DeFi lending protocol, facilitating lending and borrowing markets for a very wide range of assets based on Ethereum. It began as a peer-to-peer lending platform called ETHLend, which launched in 2017.
The protocol later re-created itself into Aave, where assets are pooled together for more efficient markets. Aave now manages 11 figures worth of user funds, all in a completely decentralized fashion.
Formerly known as ETHLend, Aave leverages a native token – AAVE – which is used for governance and staked as insurance against shortfall events in exchange for rewards.
- Largest DeFi lending protocol
- Available on Ethereum, Polygon and Avalanche blockchains
- Additional features such as an AMM market and flash loans
- Governed by AAVE token holders.
Compound Finance was one of the very first decentralized lending platforms of its kind, pooling like-kind assets together for a seamless lending and borrowing experience. Users can earn interest on a wide range of Ethereum-based assets, as well as borrow against their deposits in an over-collateralized fashion.
Interest rates on Compound Finance are algorithmically adjusted, depending on supply and demand for each asset. Compound was the first major lending protocol to offer a governance token that provides users with voting rights for protocol direction – in this case COMP.
- Pioneering DeFi lending protocol
- Governed by COMP token holders
- Very user-friendly interface
- Integrated into many wallets and exchanges.
Maker is a permissionless lending platform built around the decentralized stablecoin, Dai. Users can use the Oasis app to mint and borrow Dai from the protocol, by over-collateralizing a position with any one of over 20 different Ethereum-based tokens. This is done at the small cost of a “stability fee”.
The Maker protocol also has an interest-bearing component that pays out a rate to Dai depositors – this is called the Dai savings rate, or “DSR”.
- The original DeFi lending protocol
- Mint/borrow DAI stablecoins by locking up tokens as collateral
- Earn a return on DAI via the DSR contract
- Governed my MKR token holders.
List of DeFi Lending Platforms 2022
- Cream Finance
- Oasis borrow
- Unit protocol
List of CeFi Lending Platforms 2022
What to Consider When Deciding to Lend?
There are a variety of factors to consider when choosing where to lend or borrow coins. This may include the following:
- Interest rates: Which platform provides the best interest rate for the asset of interest? Is this interest rate variable or fixed?
- Risks: What are the risks involved in the platform? This may include default risk and regulatory risks for centralized platforms, or smart contract risks for decentralized platforms. Do these risks justify the rate of return?
- Assets supported: Does the platform support the asset you wish to lend/borrow? Do you require fiat-currency based features?
- Lending terms: Is the lending term fixed or flexible? How quickly can you withdraw your funds if you want to use them?
- Anonymity: Do you mind trusting a third party with your personal information for know-your-customer (KYC) processes? Do you want to maintain anonymity?
Being able to answer the above questions will go a long way in narrowing down your options for the perfect lending or borrowing platform.
How Often do Rates Change? (Variable, Fixed, Intro Rates)
In most cases, DeFi lending platforms change their interest rates constantly, according to supply and demand – this is an algorithmic process.
As for CeFi lending platforms, interest rates can often be fixed for an indefinite period. Although this can be more stable in the short-term, there can be large and unexpected adjustments in the long-run.
Most Popular Lending Currencies (USDC, USDT, BTC, DAI)
Tether (USDT) is the largest stablecoin that exists today. It was one of the very first stablecoins to exist, originally launched as “Realcoin” in 2014. Tether has a controversial history involving its reserves, including the comingling of funds with closely-related exchange, Bitfinex.
USDT tokens are backed by a wide range of assets, including cash and cash equivalents, commercial paper, corporate bonds, precious metals and even other digital assets.
USD Coin (USDC) is the second-largest stablecoin behind Tether. It was started by the CENTRE consortium – a collaboration between financial technology firm Circle, and the highly-popular Coinbase cryptocurrency exchange.
USDC is backed 1:1 by cash and cash-equivalents, as well as short-duration US Treasuries.
Dai (DAI) is a decentralized stablecoin, which works differently to Tether and USD Coin. Instead of a centralized company holding assets in reserve, Dai is managed by a protocol called Maker. Dai is backed by Ethereum-based assets deposited into Maker “vaults”, in an over-collateralized fashion.
Bitcoin is the original cryptocurrency and has remained the largest since its inception. Although there is high demand for lending and borrowing Bitcoin, this is primarily captured by CeFi lending markets. This is due to Bitcoin having its own blockchain, therefore being more difficult to integrate into DeFi platforms. One way around this has been through the use of Wrapped Bitcoin (WBTC), an Ethereum-based token which is pegged to the value of Bitcoin.
What advantage does a centralized (CeFi) lending platform have over a decentralized one?
Centralized lending platforms have a few advantages over decentralized ones. This includes being able to offer fiat currency services, as well as support a variety of different blockchains.
CeFi platforms also avoid smart contract risk, however also carry their own risks that are unique to centralized companies.
What advantage does a decentralized (DeFi) lending platform have over a centralized one?
Decentralized lending platforms primarily benefit from the absence of centralized party risks and constraints. They typically allow users to erase human error and the risk of company bankruptcy, as well as avoid giving up personal information that would compromise anonymity.
Although free of centralized risks, DeFi platforms do have their own smart contract risk, i.e. the risk of a bug in the underlying code.
Once I deposit money into a platform, how long until I can access it again?
Most crypto lending platforms enable users to withdraw their funds at any time they wish, with a few exceptions. DeFi platforms tend to be the most flexible, with users able to retrieve their funds almost immediately upon demand. CeFi platforms tend to be slightly slower, with withdrawal requests often taking 24-48 hours (or longer) to process.
What do I need to get started with DeFi?
To get started with DeFi lending, you will need a web3 wallet such as Metamask, to connect to the chosen decentralized application. You will also need to hold the cryptocurrency you wish to lend in that wallet, as well as some Ether (ETH) to pay for the necessary on-chain transactions.
A list of supported currencies across different lending platforms is provided on the chart at the top of this page.
What do I need to get started with CeFi?
To get started with a centralized lending platform, all you typically need is some fiat currency and proof of identity. Sign up with your desired CeFi platform and complete the verification process. You can then use your fiat currency to purchase the crypto you wish to lend.