Cryptocurrency and blockchain technology has empowered people from all over the world by allowing them to become their own bank. Since its inception, the boundaries of the technology have been explored tirelessly by teams and cryptocurrency enthusiasts across the globe. This has led to the creation of a space called Decentralized Finance (DeFi). With DeFi, people are able to do things with money that were very challenging, if not impossible, before the advent of blockchain technology. One of the major players in the DeFi space is a cryptocurrency exchange called KuCoin. In this article, we will take a look at what KuCoin is, as well as one of the latest DeFi services that are available on the KuCoin platform: cryptocurrency lending.
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KuCoin Lending: What is DeFi?
Decentralized Finance, or DeFi, is an emerging financial technology that is built on top of secure and distributed digital ledgers, similar to those used by cryptocurrencies. The main benefit of Decentralized Finance protocols is that they don’t rely on banks and institutions to facilitate and maintain their inner workings. This removes the control that these banks and institutions have on money, financial products, and financial services.
Decentralized Finance eliminates the need for intermediaries and allows people, merchants, and businesses to take part in financial transactions through emerging technologies. Anyone from anywhere in the world, provided they have access to the internet, can lend, trade, and borrow using automated software and advanced protocols that verify financial actions in distributed financial databases.
DeFi applications give users more control over their finances through personal wallets and trading services that are designed to make the interaction with these applications as simple and seamless as possible for the end-user. These wallets are made available through DeFi providers and platforms. One of these providers is KuCoin. Let’s take a look at what KuCoin is.
KuCoin Lending: KuCoin's Background
Launched back in 2017, KuCoin is a universal cryptocurrency exchange platform. Since its launch, the exchange has grown into one of the most popular cryptocurrency exchanges in the world and is currently listed as a top ten cryptocurrency exchange in terms of the daily trading volume. KuCoin now has over eight million registered users from across the globe and offers its clients numerous digital assets to choose from.
KuCoin also offers its users access to several DeFi services, one of these services is cryptocurrency lending. Let’s discuss what cryptocurrency lending is and how to get started with KuCoin’s cryptocurrency lending service.
KuCoin Lending: What is Crypto Lending?
Cryptocurrency is one of the most popular investments because of its potential for higher returns as opposed to traditional asset classes. Many cryptocurrency investors strive to buy low and sell high. This is more of a long-term strategy and is known as HODLing in the cryptocurrency space. However, some investors don’t have the patience needed for this strategy and are looking for a return on their investment that is more short to medium term. The problem with looking for shorter-term investments is that you are more at risk of losing your invested funds due to the high short-term price volatility in the cryptocurrency space. With this being the case, investors searched for new ways to earn shorter-term returns on their investments while also reducing the risk brought on by the high volatility in prices. This resulted in cryptocurrency lending.
Cryptocurrency lending is an investment strategy that enables the lending of cryptocurrency between individuals in exchange for an agreed-upon interest rate on the lended amount. Most of the big exchanges in the cryptocurrency space offer cryptocurrency lending to their users, but the process may vary for each exchange. No matter what the process is for cryptocurrency lending on each exchange, the basic premise is that investors and borrowers are connected through these platforms.
The investors will deposit cryptocurrency into their wallets on the exchange. Once the funds are deposited, the investor will need to activate the cryptocurrency lending functionality. Afterward, the investor will automatically earn interest on their cryptocurrency. This interest is based on the amount that they have in their wallet. For example, say the investor has half an Ethereum coin in their wallet and the lending function generates around six percent yearly (the average in the cryptocurrency space), then they will earn six percent on their half an Ethereum coin which will be around 0.03 Ethereum. Normally the interest will be paid in portions weekly, depending on the cryptocurrency platform you use.
The borrower is usually an individual that has a bit of cryptocurrency but is in urgent need of some fiat money. This individual will then go on the platform and front some of their cryptocurrency funds as collateral depending on the amount of money they want to borrow and the platform that they use. Typically, the amount that a person can borrow is around 25% to 50% of the amount of cryptocurrency that the borrower fronts as collateral.
KuCoin Lending: What is it?
KuCoin lending has created a name for itself in the cryptocurrency lending space and has become one of the most popular platforms for people to take part in cryptocurrency lending.
Similar to other cryptocurrency lending platforms, KuCoin lending matches users that need to borrow funds with the most appropriate lenders. Once matched, the borrower receives the money and the lender starts to earn interest on the amount of money that they lent. At the time of writing, there are over 65 cryptocurrencies that are supported for lending on KuCoin. KuCoin lending also boasts some relatively high annual returns on investments, for example, 40% for USDT at the moment.
KuCoin Lending: Getting Started
Add Assets To Your Main Account
The first few steps before you can start lending on KuCoin lending are to create an account on KuCoin if you haven’t already, and then add assets to your main account.
Enter the Lending Marketplace
Next, you’ll want to navigate to the KuCoin lending marketplace and create a lending order. To enter the lending marketplace, go to the menu and click on Finance, then click Crypto Lending. This will redirect you to the lending marketplace.
Once in the marketplace, you will see the list of coins that you are able to lend in the left sidebar. You can see the expected daily returns of each coin by clicking on the coin. These returns are written as daily interests, so you’ll need to multiply them by 365 to get an idea of the yearly return. Overall rates range from 3% to 70% depending on the coin that you’re lending.
To start lending, simply fill in the loan amount, the daily interest rate (can range from 0 to 0.2%), and lastly the lending term. The lending term is how long the loan can be taken out for at a time and can either be 7, 14, or 28 days.
Your Order Will Be Listed On the Marketplace
After you have completed the above two steps, your order will now be listed on the marketplace for borrowers to see!
KuCoin Lending: Is it Worth it?
So, after taking a look at KuCoin lending, the question is: is it worth it? Well, this really depends on the investor or individual.
Here are some things to take into consideration.
KuCoin is in the top 10 list of exchanges in terms of daily trading volume and has thrived in the cryptocurrency marketplace ever since its launch in 2017. With its strong reputation for being a go-to platform for all cryptocurrency activities, KuCoin is a safe, solid platform to use for cryptocurrency lending.
Risk Appetite and Investment Goals
As mentioned, whether or not KuCoin is the ideal platform for you depends on you really. Furthermore, cryptocurrency lending may not be worth your while if you are looking for a longer-term investment or want higher returns on your investments.
KuCoin lending offers a wide variety of cryptocurrencies that you can lend, as well as flexible terms for your lending orders. You are also matched up with the most suitable lender or borrower thanks to KuCoin’s matching algorithm. If you’re looking for a secure and flexible cryptocurrency lending platform, then KuCoin is ideal for you. Another great thing about KuCoin lending is the high returns that they boast.
These are only a few things to take into consideration when trying to identify if KuCoin is the platform for you when looking at cryptocurrency lending. The main determining factors are what your expectations are as an investor and how much risk you are comfortable with.
KuCoin Lending: Conclusion
Cryptocurrency lending is a DeFi protocol that allows cryptocurrency investors to earn a reasonably good return on their investment while also reducing the risks associated with the high price volatility in the cryptocurrency marketplace. Access to cryptocurrency lending is usually made available through platforms such as exchanges. One such exchange is KuCoin, which is in the top 10 list of cryptocurrency exchanges in terms of daily trading volume. Launched in 2017, KuCoin offers cryptocurrency investors a flexible, secure cryptocurrency lending service that boasts relatively high annual returns on their investments.