Why cryptocurrency secured lending is becoming an alternative to conventional cryptocurrency exchanges
Do you need ‘real money’, but you do not want to part with your cryptocurrency savings, expecting that over time the value of your asset will increase? Then you can use the loan service secured by any cryptocurrency. The conditions for obtaining a loan can be chosen by you yourself, and at the end of the loan term you can either return the loan and get a more expensive collateral back, or simply transfer the collateral to the creditor, which is equivalent to selling a cryptocurrency. The choice depends entirely on your desire and market situation.
Cryptocredits are a great alternative to selling your crypto assets. The system is designed in such a way that with their help it is possible to simultaneously save digital assets and get free funds that can be spent on investing, trading or any other personal needs.
Crypto-investors often face such a problem when they need fiat money, but it is difficult to decide on the exchange of cryptocurrencies or do not want to sell their digital savings, since this is often associated with the loss of further profit. It is to solve this problem, first of all, loans secured by cryptocurrencies are aimed.
Instead of selling bitcoin at a disadvantageous rate, you can place an application for a loan secured by it, while indicating the optimal conditions for yourself. The amount, loan term and method of obtaining money is chosen by the borrower.
After the application is accepted by the lender, the cryptocurrency security is sent to the store, and the loan amount is transferred to the borrower. At the end of the loan period, the loan amount must be repaid, or the transferred pledge will be finally written off in favor of the lender.
The cryptocredit scheme implements a mutually beneficial relationship between the borrower and the lender. The conclusion of this type of transaction has many advantages for both parties:
- An easy way to get free money into circulation;
- The opportunity to capitalize on providing loans with minimal risk;
- Minimum interest on the use of credit funds;
- The ability to independently choose conditions and currencies;
- Cryptographically secure transactions;
- Lack of intermediaries in transactions.
The demand for this service is also provided by the reluctance of investors to part with their assets taken in the long term.
What are the advantages for a borrower with P2P lending secured by bitcoin
In traditional lending methods, customers of financial institutions are forced to agree to the terms of the lender. Crediting on the security of bitcoin is realized through the P2P system, that is, money is taken directly from the lender and without intermediaries, and not from the so-called “fund” of the company. This allows you to independently choose the conditions for obtaining borrowed funds, currency and method of receipt. In addition, this method significantly reduces the cost of issuing loans, since it eliminates the need to pay for the services of a huge number of intermediaries and employees.
The financial benefit for the lender is clear, but what is the benefit for the borrower? It definitely exists, otherwise such a method of lending would not gain popularity among users who own assets in the amount of tens of thousands of dollars.
Suppose a borrower has the amount of money he needs in cryptocurrency, but at the moment he wants to purchase goods or services that are sold exclusively for fiat money. According to the traditional scheme, it would be necessary to sell cryptocurrency or, for example, exchange bitcoin for rubles in some exchange or LocalBitcoins in order to pay for the purchase, thereby depriving yourself of a valuable asset. That is, at the time of the sale transaction, the profit will already be fixed.
By placing a cryptocurrency instead on bail, the borrower also receives the necessary amount of money, and retains the opportunity to capitalize on the future growth of the cryptocurrency. For example, instead of immediately selling bitcoins and paying for the purchase of a car, you can use bitcoin as a guarantee for obtaining free funds.
The average annual interest rate is less than 15%, and some services offer from 6% per annum. Over a long period of time, the value of top cryptocurrencies increases by hundreds of percent. It turns out that having received a loan and paying interest, the borrower will still receive benefits, but you could lose it by selling coins immediately.
In monetary terms, this can be expressed as follows. Suppose that the borrower takes a loan at a rate of 1 BTC \u003d 4400 USD, and by the end of the loan term returns it and takes back his coins, which at the current exchange rate are already at 6000 USD. Thus, the profit on the loan will be $ 1,600 less interest, on the requested loan amount.
Security of P2P loans secured by cryptocurrency
P2P loans secured by cryptocurrencies can be called the least risky way to get free fiat money. First, the borrower no longer needs to worry about lost profit. Naturally, each investor seeks to sell the crypto at the best price and seriously fears that in the future the rate may become much lower, leaving it in the red if holding the asset for a longer time, or much higher, depriving potential profit, since the coins will already be sold at a lower price Cost.
Cryptocredits completely solve this issue. The borrower retains the opportunity to get even more benefits from investing in digital assets, and if it is not possible to repay the loan by the repayment date, then we can assume that it was sold at the rate at the time of the loan.
P2P loans are also protected from the technical side. Cryptocurrency loans are issued directly from user to user without the intermediary participation of a third legal party. For example, the P2P Biterest platform does not use third-party resources to store collateral, that is, borrowers do not transfer their cryptocurrency to a third-party organization for storage. Their pledges are stored directly on the Bitcoin blockchain.
Best security against burglary or theft is achieved on those platforms that use Multisignature addresses. Before concluding a deal, each party, namely the borrower, lender and service intermediary, forms private keys, on the basis of which a multisig address is formed in the future, where the pledge will be stored.
To make any operation with security coins, you need at least two private keys to sign the transaction. Thus, the security is protected and cannot be stolen by any of the parties. The likelihood of a hack or hacker attack is impossible, since all keys are stored on different sides, in no way connected. An attacker could get bitcoins only in case of breaking the Bitcoin network protocol, but this situation is impossible.
Which loan service to choose
The lending industry secured by cryptocurrency is gradually developing along with the popularization of digital coins. The leader in the industry of independent P2P loans is the Biterest service. Its developers set themselves three important goals:
- Create an absolutely safe environment for credit transactions secured by digital currencies;
- Fully decentralize the transaction process to reduce the risks of fraud by intermediaries;
- To provide lenders with the opportunity for low-risk earnings and not allow borrowers – crypto-investors to lose the profit from investments.
Biterest is an escrow service that monitors the fulfillment of conditions by the parties, but does not act as an intermediary between the parties and does not store keys and keys. This is a key feature of the resource, which gives it a significant margin from competitors who either independently issue loans or take responsibility for keeping collateral.
The model implemented on the service has an increased degree of security, while direct interaction between users is maintained. Using the services of the service, you can issue a loan secured by Bitcoin, the value of which is constantly growing and, according to analysts, can reach a price of 50 thousand dollars per 1 BTC.
When forming loan conditions, service users have the opportunity to independently indicate:
- Loan amount;
- Receiving currency;
- Loan terms;
- Discount on the value of the collateral;
- Transfer method.
Recently, the Biterest service has expanded its functionality. If earlier borrowers had to completely enter the conditions of a loan application on their own, now there is still the opportunity to choose one of the options offered by lenders. Thus, now you can get a loan instantly and without commission for the borrower.
To get an instant loan, it is enough to follow only three simple steps:
- Select the “Get a loan” section on the official website of the service and find the lender’s advertisement in it that meets all the requirements. The application will contain detailed information on loan conditions: possible terms, interest rate, currencies and so on.
- Agree to the terms of the ad you like and transfer the deposit.
- Get your credit money.
The lender agrees to complete the transfer of credit funds within the time period specified in the application. Compliance with all the conditions specified in the application is strictly controlled by the administration of the service. If they were violated, the creditor’s account is blocked, and the borrower is given the keys for the return receipt of collateral coins.
At the disposal of users of the service are many options for sending credit funds. The service cooperates with the following payment systems:
- QIWI wallet;
- Yandex money;
- Bank transfers, including international ones.
Biterest service is a completely safe way to get a loan secured by cryptocurrency. Unlike most of its competitors, this platform does not have physical access to secured bitcoins. The administration of the resource does not have the technical ability to see the private keys of users, since they are not connected with the server side of the platform. A pair of keys for confirming transactions is generated directly in the browser of a certain user, or he independently uploads his public key, which is used to create a multisig address. This ensures that access to the pledge is equally distributed between the three parties that control its location on the multisig address in the blockchain. Platforms that use third-party services cannot guarantee and control the security of their users’ pledges, so they offer deposit insurance in case of theft or hacker attacks.
An important advantage of obtaining a loan through Biterest is the low commission fees. The platform charges 2.5% per annum of the loan amount from the lender for its services. Obtaining a loan through the announcement of the creditor is carried out without writing off a commission from the borrower, if through the placement of an application on the platform – 0.5% per annum of the loan amount. The advantage of obtaining a loan through the announcement of the lender is the instant receipt of funds, through the placement of a loan application on the platform – borrowers can choose when they are ready to make a deposit. Cryptocurrency can be transferred immediately to secure the application and thereby its attractiveness will be significantly increased in the eyes of the creditor, or the security can be transferred already after the creditor accepts the application.
Cryptocurrency lending is the best option for obtaining free money for investors, which helps to preserve their capital. It is foolish to deny the fact that given the potential of Bitcoin to grow, selling it to solve current financial problems is not a rational action.
Using the Biterest service, crypto investors actually get the opportunity to kill two birds with one stone: they save profits from owning a cryptocurrency and get the necessary financing. Thanks to well-functioning work and a carefully thought-out implementation scheme, when making a transaction, both parties enter into profitable cooperation and do not risk losing their savings. Preferring this method of lending, you will not meet bonded interest, but rather, you can get the most profitable loan.