{"id":15393,"date":"2024-10-21T16:21:17","date_gmt":"2024-10-21T16:21:17","guid":{"rendered":"https:\/\/mycryptomania.com\/?p=15393"},"modified":"2024-10-21T16:21:17","modified_gmt":"2024-10-21T16:21:17","slug":"microloans-on-blockchain","status":"publish","type":"post","link":"https:\/\/mycryptomania.com\/?p=15393","title":{"rendered":"Microloans on Blockchain"},"content":{"rendered":"

Photo by Daniel Thomas<\/a> on\u00a0Unsplash<\/a><\/p>\n

How Lending Can Boost Your Bank by 50% in 5\u00a0Minutes<\/strong><\/h4>\n

Recently, I started thinking: what do people who have invested in altcoins and are waiting for a \u201cto the moon\u201d moment do when they don\u2019t even have enough for food? Sell at a\u00a0loss?<\/p>\n

The answer came from deep within: take a loan. And if dealing with traditional credit organizations isn\u2019t appealing, and the chances of getting a crypto-backed loan approved are slim, there\u2019s only one way\u200a\u2014\u200alending.<\/p>\n

What is\u00a0lending?<\/h3>\n

In crypto, lending is the process where a user deposits their assets as collateral to borrow another cryptocurrency.<\/p>\n

In simple terms, it\u2019s like a company that gives you cash against your crypto as collateral. For example, let\u2019s say I bought 10 ETH with all my money and believe that in six months I\u2019ll be able to sell Ethereum at $5K. I spent everything on it, so I don\u2019t even have money left for food. Selling ETH at the current price feels like madness, so I turn to lending platforms. I lock up my ETH as collateral and get around 1\u20132% annual interest. With 10 ETH currently worth $26K, I can borrow up to ~19K in USDT. I take those USDT, say, at an interest rate of 10\u201312% per year, and can do whatever I want with them. If I want, I can buy a car and work as a taxi driver until the altcoin season kicks in, or if I believe it\u2019s coming soon, I could even buy more ETH with that\u00a0money.<\/p>\n

It sounds like free money\u200a\u2014\u200aalmost like leverage for free\u200a\u2014\u200abut not so fast. If the value of your collateral drops significantly, there\u2019s a chance it will get liquidated. That\u2019s why you need to keep an eye on a metric called \u201cAccount\u00a0Health.\u201d<\/p>\n

What is Account\u00a0Health?<\/h3>\n

Account health is a ratio that shows how safe your collateral is compared to the loan. If the ratio drops below 1, your position could be liquidated.<\/p>\n

The larger your loan relative to the collateral, the closer you are to liquidation. And although lending platforms allow borrowing up to 80% of the collateral\u2019s value, it\u2019s safer to borrow a smaller amount to minimize\u00a0risk.<\/p>\n

In summary<\/h3>\n

Lending is an excellent tool for increasing your liquidity in a growing market. The only real risk that can wipe out your deposit is greed. The less you borrow relative to your collateral, the better. Any sudden drop in the market, and your position might be at\u00a0risk.<\/p>\n

When could this be useful? Anytime. If you need money for a short or long term, and you don\u2019t want to sell your assets, this is a great solution.<\/p>\n

While testing out lending platforms, I decided to collateralize my 1800 OP tokens and borrow some stablecoins. I ended up borrowing $1500 with $3100 worth of collateral. My account health was 1.29 (if OP drops from $1.43 to $1.11, my position would be liquidated.) Meanwhile, I can use my $1500 and only pay $13 per month in interest\u200a\u2014\u200apretty amusing. Renting\u00a0capital.<\/p>\n

Which lending platforms can I recommend?<\/h3>\n

There are two main types of lending platforms in crypto\u200a\u2014\u200acentralized and decentralized. Just like with where you store your money, each has its pros and cons. No platform is entirely hack-proof, so choosing wisely is crucial. I tried Aave, one of the oldest and most popular platforms. I like to think that my funds are relatively safe\u00a0there.<\/p>\n

Find a lending platform that suits your needs and where you can use your crypto as collateral. Just remember, the market is always looking to take everything you have and even more. Fight for your money!\u00a0Hug!<\/p>\n

Drop some likes if you enjoyed reading this\u00a0article!Telegram<\/strong><\/a> with alpha\u00a0content<\/strong><\/p>\n

Microloans on Blockchain<\/a> was originally published in Coinmonks<\/a> on Medium, where people are continuing the conversation by highlighting and responding to this story.<\/p>","protected":false},"excerpt":{"rendered":"

Photo by Daniel Thomas on\u00a0Unsplash How Lending Can Boost Your Bank by 50% in 5\u00a0Minutes Recently, I started thinking: what do people who have invested in altcoins and are waiting for a \u201cto the moon\u201d moment do when they don\u2019t even have enough for food? Sell at a\u00a0loss? The answer came from deep within: take […]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-15393","post","type-post","status-publish","format-standard","hentry","category-interesting"],"_links":{"self":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/15393"}],"collection":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=15393"}],"version-history":[{"count":0,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=\/wp\/v2\/posts\/15393\/revisions"}],"wp:attachment":[{"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=15393"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=15393"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mycryptomania.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=15393"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}