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Wednesday, April 24, 2024

Can Crypto Lending Be at Par with Traditional Finance?

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There is no doubt that the crypto economy has grown exponentially as vast amounts of money were invested into non-fungible tokens (NFTs), decentralised finance (DeFi), cryptocurrencies, crypto indices, and decentralised options markets.

The DeFi sector, for example, showed an increase in its total value locked (TVL) from $18 billion to $240 billion between January 2021 and 2022. The growth in the crypto lending space, on the other hand, also experienced a massive increase from $60 million to $400 million in the same period, boosted by companies like Genesis and Nexo.

Source: Pixabay

Yet, not many retail customers understand the sector and its financing options. So what does it have to happen for crypto to be at par with traditional finance?

If you also want to understand the cryptocurrency market, always do your research regarding such trends. For a start, check websites like Binance, Bitcoin Profit and CoinMarketCap that can give access to an abundance of reliable crypto resources and advanced crypto services.

No credit scoring systems for crypto users.

Unlike traditional financial systems that require credit checks to apply for a loan, the crypto lending market does not impose any requirements. When it comes to the crypto lending market, there are no credit scores, and sensitive data remains anonymous, which many crypto enthusiasts love. The truth is that many experts claim that the crypto sector is much better and able to replace traditional banking and finance. 

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A credit scoring system, however, could have a high appeal to more traditional consumers and help develop a transparent and healthy crypto lending market. Besides, the crypto space could gain more popularity with the introduction of new crypto-related jobs and rewards, such as airdrops, larger loans with lower interest rates and access to longer-term loans.

Source: Pixabay

Customers can have a wide choice of goods and services.

The crypto space keeps expanding. The number DeFi products, crypto projects, and NFTs is impressive. Clients in the crypto environment even have the opportunity to own digital goods by paying in instalments for them, similar to traditional loans or mortgages.

Yet, not many supporters of traditional finance understand the cryptocurrency sector. Many admit that more information and user-friendly features suitable for non-tech users are needed to boost mass adoption.

Customers need to have a reliable collateral evaluation system.

It is a fact that crypto users can easily use their assets as collateral to access loans. It is also true that cryptocurrencies are highly volatile. Cars or houses, which are examples of traditional collateral, have greater predictability and do not undergo market fluctuations like in the crypto world.

Thus, when it comes to crypto lending, some experts claim that a high-frequency collateral evaluation system is needed to help people embrace crypto lending services.

Source: Pixabay

Conclusion

The topic of crypto lending is complex, with its various pros and cons. Crypto enthusiasts believe that the sector can surpass traditional finances, especially as the crypto economy flourishes into an appealing and more diversified market space for more clients.

Nevertheless, remember that the cryptocurrency sector remains risky, and you may lose your capital.

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