The creation of Bitcoin in 2009 meant that decentralized cryptocurrencies were not just a theoretical possibility — but the financial instrument of the future. Predictably, the rise of cryptocurrencies also led to the creation of related financial instruments, entities and institutions; mostly as crypto analogues to their already existing fiat-based counterparts.
Fast forward a few years since the inception of Bitcoin, and the first platforms for crypto loans began appearing. While these first websites (such as SALT) did charge fairly steep rates to prospective borrowers — they were still a more affordable alternative to credit card companies. And this borrowing option is only more attractive in 2021, now that the market is populated with enough new players like BitLeague — providing more reasonable rates and all the other advantages of crypto.
Considering all of this, just how good of an idea is borrowing in Bitcoin? We’ll take an in-depth look at the pros and cons right here!
Benefits of crypto lending
There aren’t many people in the world more fortunate than those who’ve decided to invest in cryptocurrencies like Bitcoin in their early days. And the smartest of those who have a decent crypto stash have staved off selling their crypto; instead holding on tight and watching their value rise.
However, at the end of the day — unlike a fiat savings account or investment portfolio, your crypto assets aren’t earning you more money while they’re sitting in your wallet; in fact, when a bear market rears its head and prices go down, you’ll probably be losing some.
And what happens when you need some of your crypto assets for a home renovation or a car? In the long run, selling off your BTC stash means losing money if you’re a crypto believer awaiting its next bull run. That’s where crypto lending comes in — allowing you to use your crypto as a collateral and get a fiat loan.
The best part is, platforms like BitLeague provide lower interest rates than you’d get at a bank. And perhaps most importantly for some people — crypto lending platforms don’t take purchasing and credit histories into account; all they care is whether you have the crypto collateral or not.
Risks of crypto lending
If you’re of a bullish stance when it comes to the future of crypto, trying to avoid selling off your Bitcoin or other currencies is understandable. And while Bitcoin loans can help with that, you should also take some of the risks into account as well.
Remember — putting your crypto assets forward as collateral means that you’ll have to take them out of your wallet. And when you’ve got a trustworthy crypto lending platform, that’s not so bad; but your crypto is still far more exposed than it would otherwise be.
For instance, BitLeague has solved this issue by using a cold wallet for the crypto assets of their customers — a “cold wallet”. This crypto banking platform only holds a small amount of the assets in online wallets that are traditionally more easily compromised.
Conversely, their cold storage includes immediate measures in the case of a security breach alert, a Faraday cage, and a cement case heavier than a thousand pounds. Plus, they utilize Multisignature technology to ensure maximum protection against potential attacks or key losses.
Why it’s worth the risk
At the end of the day, knowing the risks and benefits of crypto loans is definitely important; but we believe that the benefits far outweigh the costs. After all, not only do you get to keep your crypto intact and reap all of the benefits of its future increases in value; but you also get access to loan rates that are far more appealing compared to traditional bank ones.
All you need to do is to ensure that you’re dealing with a secure and trustworthy lending platform like BitLeague — and the only major hurdle in the form of security risks will be eliminated!