Crypto-based lending expanded in 2019, making up one of the most significant pieces of decentralized finance, noted Messari Crypto. Platforms proliferated, lending out assets for various uses. In the case of Maker, the lending created the DAI stablecoin. Other types of lending rely on directly giving access to assets to be used in derivative trading.
Bitcoin (BTC) remained among the leading coins participating in lending activities, despite the fact that Ethereum (ETH) is one of the best-used platforms for DeFi. In the second half of the year, some of the crypto schemes also started using fiat directly.
The observation on crypto lending is part of the Messari prediction package for 2020, taking out lending as one of the more prominent trends. Despite the expectation of more users joining in, the analysis remains cautious.
Crypto-collateralized lending remains risky, with failures in the past, as in the case of SALT. Maker, one of the largest crypto lending schemes, has gone through liquidations during ETH volatility periods.
And Synthetix, the leading token in crypto lending, offers outlandishly high annualized interests at 60%, potentially holding great risk.
Crypto experts warn lending is a form of margin betting on crypto price moves, veiled as receiving passive income. The sector remains unregulated, and most DeFi pools are still a free-for-all. But the increasing tracking requirements may also lead to some projects applying KYC measures.
Decentralized lenders released $650 million in value in 2019, while Celsius, a semi-centralized project, lent out $2 billion in crypto loans. Smaller DeFi lenders go for as much as $100 million per month, the report noted.
Crypto lending can be a factor in asset futures markets. Using loaned funds as collateral, however, remains extremely risky. Even tokens have switched their use cases to include crypto lending:
https://twitter.com/IOStoken/status/1205880232156241920
The trend for using coins as collateral arrived as altcoin trading slowed down in 2019, and most assets drifted with extremely low volumes.
